Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

ROYAL ASSENT

Mr. Speaker: I have to notify the House in accordance with the Royal Assent Act, 1967, that The Queen has signified Her Royal Assent to the following Act:

The Public Expenditure and Receipts Act, 1968.

PRIVATE BUSINESS

BRIGHTON MARINA BILL

Lords Amendments to be considered Tomorrow.

MILL LANE, KIRK ELLA, BURIAL GROUND BILL

Read the Third time and passed.

Oral Answers to Questions — MINISTRY OF DEFENCE

Forces Outside Europe (Route, Options)

Mr. Biggs-Davison: asked the Secretary of State for Defence whether he will make a further statement on the route options which will be open for future deployment of Her Majesty's Forces outside Europe.

The Secretary of State for Defence (Mr. Denis Healey): No, Sir.

Mr. Biggs-Davison: Since the eastabout route round the north of Africa might not be available in an emergency, is not the policy of bans and sanctions against the Governments of Southern Africa a dangerous folly subversive of national

security? And how would the Government reinforce Hong Hong?

Mr. Healey: To the first part of the supplementary question the answer is, no. To the second part of the supplementary, by a variety of routes both east-about and westabout.

B.A.O.R. Brigade, United Kingdom (Deployment)

Mr. James Davidson: asked the Secretary of State for Defence how long it will take to transport and deploy the one British Army of the Rhine brigade stationed in the United Kingdom to its war station on the continent of Europe.

The Under-Secretary of State for Defence for the Army (Mr. James Boyden): A matter of days.

Mr. Davidson: May I ask where its transport and other equipment will be kept, and whether the duty of the brigade being based in the United Kingdom will be taken by each brigade in rotation or whether it will be taken by one brigade?

Mr. Boyden: It is not the practice to give details of operational contingency planning.

Mr. Ramsden: In view of Herr Kiesinger's statement that the quarters vacated by this brigade will be required by the Germans for an enlarged Bundeswehr, where will the brigade go either for training or in a contingency which did not require it to go straight into the field?

Mr. Boyden: It will be located at the direction of the C.-in-C., B.A.O.R.

Hong Kong Garrison

Mr. James Davidson: asked the Secretry of State for Defence what are the responsibilities to be fulfilled by the garrison in Hong Kong.

Mr. Healey: The responsibilities of British forces in Hong Kong are to assist if necessary in maintaining internal security in the Colony and in its external defence.

Mr. Davidson: Is it the opinion of the Secretary of State for Defence that the garrison force would be capable of defending the base against external attack or is it merely there for aid to the civil power?

Mr. Healey: We do not at the present time expect a massive attack, but I am not prepared to discuss our contingency plans in that event in the House.

Mr. A. Royle: Can the right hon. Gentleman give a firm assurance that the reinforcement of the Hong Kong garrison in case of serious internal difficulties has the highest priority in his Department?

Mr. Healey: Yes. I am very glad to do that.

Indian Ocean and South-East Asia (Staging Posts)

Mr. G. Campbell: asked the Secretary of State for Defence what staging posts he now expects to be available to the United Kingdom forces in 1972 in the Indian Ocean and South-East Asia.

Mr. Healey: This is one of the questions to be considered in the context of the gene-al review of the rôle, size and shape of the forces, mentioned in the statement made by my right hon. Friend the Prime Minister on 16th January.

Mr. Campbell: Has the Secretary of State realised that this is a very important question for world peace-keeping and also for communication with Hong Kong? Does he expect such staging posts to be under United Kingdom sovereignty or subject to agreement with other countries?

Mr. Healey: I am afraid I am not prepared to discuss in detail what decisions are likely to be announced later this year, but I can tell the hon. Gentleman that there is a variety of possible options open here. If we were to use staging posts in the Indian Ocean they would be under United Kingdom sovereignty.

Mr. Wingfield Digby: Is it not the case that under the Simonstown Agreement there are no rights whatever to airfields? Does the right hon. Gentleman propose to negotiate those rights?

Mr. Healey: That question has not arisen.

Chinook Helicopters

Mr. G. Campbell: asked the Secretary of State for Defence whether he will reconsider the proposed cancellation of Chinook helicopters.

The Under-Secretary of State for Defence for the Royal Air Force (Mr. Merlyn Rees): The R.A.F.'s order for the Chinook was cancelled last November. There is no question of reconsidering this decision now.

Mr. Campbell: Will not the cancellation of the whole order for Chinook helicopters cause serious loss of mobility to the Army?

Mr. Rees: As my right hon. Friend said to the House on 27th November, the Chinook purchase was
designed to provide a capability which we have been able to do without until now. We will, therefore, have to do without it for a little longer …"—[OFFICIAL REPORT, 27th November, 1967; Vol. 755, c. 65.]
This still applies.

Mr. Ramsden: Does this answer mean that, contrary to military advice, the Government are planning for a reduced size of tactical company lift?

Mr. Rees: It means no further decision has been made how to meet this capability, which we have done without for a very long time.

Shoeburyness Firing Range

Sir R. Russell: asked the Secretary of State for Defence to what extent the Shoeburyness firing range was moved to Llandudno during the 1939–45 war; what was the cost of the move; on what other occasions it has been moved from its present site; and if he will make a statement.

The Minister of Defence for Administration (Mr. G. W. Reynolds): If the hon. Member is referring to the Proof and Experimental Establishment, it has never been moved. However he may be thinking of the Coast Artillery School which was moved to Llandudno in 1940 from its site on the Old Ranges at Shoeburyness. I regret that the cost of that operation is not known.

Sir R. Russell: Is there considerable objection to moving the proving and testing range in the event of somewhere in this area being regarded as a possible site for a third London Airport?

Mr. Reynolds: Despite the fact that we have searched, I am not aware that there is any other suitable site. In addition, of course, there is the cost.

Fleet Air Arm Pilots (Fixed-Wing Aircraft)

Mr. Wingfield Digby: asked the Secretary of State for Defence whether he will now reconsider his policy of stopping recruiting Fleet Air Arm pilots for fixed-wing aircraft.

The Under-Secretary of State for Defence for the Royal Navy (Mr. Maurice Foley): No, Sir.

Mr. Digby: While recognising that it costs £180,000 to train a pilot and it seems that some will become redundant very shortly, is it not important to keep open the options to retain the carriers for the few years, if we can afford it?

Mr. Foley: The phase-out of the carriers was foreshadowed in the White Paper of 1966. As my right hon. Friend the Secretary of State announced earlier this year, with the pull-out from the Far East by the end of 1971, the carriers would phase out then.

Mombasa (Naval Facilities)

Mr. Wingfield Digby: asked the Secretary of State for Defence what agreement Her Majesty's Government have with the Kenyan Government about facilities at Mombasa for Royal Navy ships taking part in the Beira patrol; what those facilities are; and whether any service personnel are stationed there.

Mr. Healey: There is no special agreement between Her Majesty's Government and the Kenyan Government relating to facilities at Mombasa for Her Majesty's ships taking part in the Beira patrol. There is however a general arrangement under which Her Majesty's ships visit Mombasa for maintenance and recreation. The facilities available include moorings, supplies and services, and a leave centre. 22 Service personnel are tationed at Mombasa.

Mr. Digby: Are these ships then to be based at Mombasa following our evacuation of Aden, since obviously it would not be suitable to base them at Simonstown?

Mr. Healey: No, Sir. These ships are not based at Mombasa now, nor have they

ever been. So far as operations are concerned, they rely on afloat support.

Mr. Eldon Griffiths: What will happen to the leave centre at Mombasa in view of the intended pull-out from the Persian Gulf?

Mr. Healey: It will close in due course.

Royal Navy (Missiles)

Mr. Robert Howarth: asked the Secretary of State for Defence when the Royal Navy will have in service a surface-to-surface guided missile capable of matching those known to be possessed by other navies.

Mr. Wall: asked the Secretary of State for Defence if he will make a statement on the development of surface-to-surface and submarine-to-surface missiles for the Royal Navy.

The Minister of Defence for Equipment (Mr. Roy Mason): As was made clear in the Adjournment debate on 13th November last year and in the debates about the Royal Navy last week, we are not planning to provide the Fleet with any surface-to-surface guided weapon in the sense of a missile fired directly from ships. Instead we shall arm the helicopters—which will be carried by all ships of frigate size and above—with an air-to-surface missile. This will have a sufficient stand-off capability to give the helicopter substantial immunity from the sort of anti-aircraft weapons carried in patrol boats, and the helicopter will be able to deliver it over a much greater range than that of the patrol boats' anti-ship missiles. Defence against missile-firing destroyers will be provided by shore-based aircraft and Fleet submarines.
As regards submarine-to-surface missiles, the Statement on the 1968 Defence Estimates (Cmnd. 3540, Chapter VI, paragraph 11) indicates that studies are in hand to improve the effectiveness of submarine-launched anti-ship missiles.

Mr. Howarth: Can my right hon. Friend assure the House that the phasing in of these new weapons systems will coincide with or precede the phasing out of the aircraft carriers?

Mr. Mason: In the time scale envisaged, we should by that time have some modern shore-based aircraft. We


should have the light strike capability of the helicopters with their light missiles, and we should have the nuclear submarines with an increased strike capability, especially with the new torpedoes likely to come into production.

Mr. Wall: Can the right hon. Gentleman say what surface-to-surface capability the Sea Dart will have, and when does he expect the submarine-to-surface missiles to be in service, provided that everything goes well with the studies?

Mr. Mason: On the first point, this is an anti-aircraft anti-missile missile and has a useful secondary capability of ship-to-ship. I cannot disclose details about its range and so forth. The anti-ship submarine-launched study is in its early stages, and I could not give the time scale.

Mr. Powell: Does not that reply disclose that there will be great difficulty in dealing with missile-firing destroyers and larger capital ships out of range of shore-based aircraft?

Mr. Mason: Not with the increasing effectiveness of the nuclear submarine force.

Canberra Aircraft (Replacement)

Mr. Robert Howarth: asked the Secretary of State for Defence if he will order the design and development of a strike/reconnaissance aircraft which would replace the Canberra and certain V-bombers.

Mr. Healey: I have nothing to add to the Answer I gave my hon. Friend on 2nd February and the statement made by my right hon. Friend the Minister for Defence for Equipment in the Debate on 4th March.—[Vol. 757, c. 440: Vol. 760. c. 160–1.]

Mr. Howarth: Can my right hon. Friend indicate what is the very maximum length of time that his Department expects the Canberra to stay in service, and what is to happen after that date?

Mr. Healey: We always planned to keep one mark of the Canberra—the latest one, which came into service in the early 1960s, the PR9—some way into the 1970s.

Northolt Airport

Mr. Molloy: asked the Secretary of State for Defence what progress has been made in negotiations to transfer Northolt Airport and environs to civil authorities: and if he will make a statement.

Mr. Merlyn Rees: No such negotiations are taking place. Following interdepartmental consultation it was concluded that R.A.F. Northolt must continue as a Service airfield, because there is no alternative airfield for some of the services operated there. The London Borough of Hillingdon and the Greater London Council were so informed in May, 1967.

Mr. Molloy: I appreciate that my hon. Friend has been co-operative in this matter, but would he not agree that this question must arise with regard to possible future developments, and can he give an assurance today that he will be prepared to consult the local authorities when the matter arises again?

Mr. Rees: I gladly give that assurance, but I would reiterate that the present advice that I receive is that there will be a continuing need for Northolt in the foreseeable future.

Mr. Emery: The hon. Gentleman will realise that the use of this airfield for military purposes is very small in comparison with any normal use. Therefore, would he consider allowing certain civil aircraft, particularly executive aircraft, to use it for specific purposes?

Mr. Rees: There is a problem here because of the nearness of London Airport and the control from there. We are having discussions with the appropriate authorities on this. A small number of civil aircraft use the airfield already.

Sovereign Base, Cyprus

Sir J. Langford-Holt: asked the Secretary of State for Defence, in view of the political uncertainty which surrounds the sovereign base in Cyprus, if he will now seek to transfer the base from Cyprus to Malta, where political and other conditions are more stable.

Mr. Healey: No, Sir.

Sir J. Langford-Holt: Has not the right hon. Gentleman said many times


that a background of political stability is vital in an overseas base? Is it not clear that this is not being provided and will not be in Cyprus?

Mr. Healey: There are all sorts of possible views about the political background to the situation in many parts of the Mediterranean. The fact is that Malta and Cyprus are about 1,000 miles apart. We intend to keep facilities on both islands. Some of the facilities are appropriate in Malta and others in Cyprus. Certainly we could not make use of Malta for all the purposes for which we now need facilities in Cyprus.

Nails

Sir J. Langford-Holt: asked the Secretary of State for Defence what quantities of nails were bought by his Department in the years 1965, 1966 and 1967, and what quantities were sold in the same period.

Mr. Mason: 320 tons, 211 tons and 326 tons respectively. 3½ tons were sold during the period in question. In addition, 19 tons of boot repairers' nails and rivets were sold in 1966 and 44 tons in 1967, following the introduction of new Army boots.

Sir J. Langford-Holt: Can the right hon. Gentleman explain how it is possible, unless these items have been badly kept, to have to buy and sell nails at the same time?

Mr. Mason: These items range from small pins to 6-inch nails. The ones that we are selling now are no longer required. We have a new moulded-sole Army boot, and we do not require nails for them.

Mr. Tom Boardman: What is the total value of the nails sold, and what proportion does it represent of the estimated saving on the scrapping of the T & AVR III?

Mr. Mason: I will write to the hon. Gentleman and give him details of the sales figures and purchase figures. They are rather lengthy.

General Service Medal

Mr. Maddan: asked the Secretary of State for Defence what are the respective percentages of total serving person

nel having a General Service Medal in the Royal Navy excluding the Royal Marines, the Royal Marines, the Army and the Royal Air Force, respectively.

Mr. Reynolds: I regret that this information is not available.

Mr. Maddan: Is that not rather a strange Answer? May I ask the Minister if he will take steps to see that it is available?

Mr. Reynolds: No, I will not take steps to see that it is available. It costs a terrific amount of money and man-hours. These medals and clasps to them are being awarded all the time. Sometimes they are not awarded until a person has left the Service, and there is no record of how many people who have had them are still serving.

Commando Ships

Mr. Maddan: asked the Secretary of State for Defence what estimates he has made of the comparative costs of constructing a merchant-type ship with a flat top and of converting an aircraft carrier for commando purposes.

Mr. Mason: None. Sir. The present commando ships will be running into the 1970's and the question of their replacement will have to be decided in the light of our future rôle in Europe.

Mr. Maddan: When decisions are being considered about this, will the Minister take very great care that the rather old-fashioned standards of naval architects which are perhaps irrelevant to Commando ships do not hamper the possibility of the most effective deployment of the Commando?

Mr. Mason: Certainly.

Mr. Speaker: Rear-Admiral Morgan Giles.

Rear-Admiral Morgan Giles: Will the Minister give consideration to the use of—

Mr. Speaker: Order. Question No. 16.

Australian Bases (Use)

Rear-Admiral Morgan Giles: asked the Secretary of State for Defence whether he will now discuss with the Australian Government plans for British forces to use Australian bases in any future emergency.

Mr. Healey: We shall continue to discuss matters of common defence interest with the Australian Government.

Rear-Admiral Morgan Giles: Has the Secretary of State been able to convince the Australians about our capability of keeping our promise to go to their aid, if necessary?

Mr. Healey: With respect, that is a completely different question and does not arise on this one.

Mr. Powell: As the right hon. Gentleman invited the Opposition two years ago to welcome the progress made in talks on this subject with the Australian Government, is it not time that we had some report on the progress which is being achieved?

Mr. Healey: As the right hon. Gentleman is never tired of reminding us, many other matters have changed in the last two years.

Armed Forces (Rôle)

Rear-Admiral Morgan Giles: asked the Secretary of State for Defence when he expects to publish his next review of the rôle of the Armed Forces.

Mr. Healey: I expect to publish a further White Paper on defence policy in July.

Rear-Admiral Morgan Giles: Will this report include final plans for the future of Army units and regiments?

Mr. Healey: It will be a report on progress. We will give the best view we are able to give at that time on the size and shape of the forces after our redeployment from the stations outside Europe is complete.

Mr. Frank Allaun: If, as the Minister sees, mutual force reductions take place by N.A.T.O. and the Warsaw Pact, would we still require the size of manpower planned for 1971?

Mr. Healey: It would very much depend on the nature of any agreed balanced force reductions.

Mr. Powell: Now that the right hon. Gentleman understands the importance of this to the House, will he give an assurance that he will endeavour to make the time of the publication of this review as early as possible in July?

Mr. Healey: Yes. I am conscious of the need to present our views on this as fast as we can, not only for the convenience of the House but also for the morale and well-being of the forces.

Mr. Ramsden: asked the Secretary of State for Defence when he will announce the future strength and rôle now being planned for the British Army in the 1970s.

Mr. Healey: I would refer the right hon. Member to paragraph 3 of Chapter I of the Statement on the Defence Estimates 1968 (Cmnd. 3540).

Mr. Ramsden: Is the right hon. Gentleman aware that what the House and the Services find difficult to understand is how, if he cannot make an announcement in broad terms about the future general size of the Army, he has been in a position to decide where the cuts should fall and how big they should be?

Mr. Healey: The right hon. Gentleman will recall that we debated these matters for six days recently. We gave an announcement in broad terms of the nature required by the right hon. Gentleman. However, I am not prepared to go beyond that until I am sure that I am on firm ground, and that will take some months further work.

Officers (N.A.T.O. Practices and Procedures)

Mr. Roebuck: asked the Secretary of State for Defence what guidance he gives to assist British officers serving with the North Atlantic Treaty Organisation in deciding how to comply with North Atlantic Treaty Organisation practices and procedures where these are in conflict with or differ from Queen's Regulations.

Mr. Reynolds: Officers must habitually exercise discretion and seek advice when they are acting in a dual capacity. I do not think that any formal guidance is necessary.

Mr. Roebuck: Is it not a fact that officers serving with N.A.T.O. are required to use every opportunity to express the point of view of that Organisation and cannot my right hon. Friend see the possibility of embarrassment being caused? Would he agree that it is undesirable and contrary to our


traditions for serving officers to express political views in public, even in the columns of The Times?

Mr. Reynolds: It is contrary to the normal traditions in the British Services, but British Service officers holding N.A.T.O. appointments have a directive from N.A.T.O. as well. They have to use their discretion and work out one against the other.

Mr. Eldon Griffiths: Is the Minister aware that many of us consider that General Sir John Hackett performed a useful public service in drawing attention to the dangers of running down N.A.T.O.? What answer has the Minister to make to the alarm and anxieties which the general so clearly expressed?

Mr. Reynolds: I do not detect any particular alarm and anxiety.

Mr. Roebuck: On a point of order. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek leave to raise the matter on the Adjournment.

Royal Observer Corps

Mr. Buchanan-Smith: asked the Secretary of State for Defence if he will now announce details of his plans to reorganise the Royal Observer Corps.

Mr. Merlyn Rees: In consequence of the Government's decision to reduce expenditure on home defence the number of observation posts will be reduced from 1,559 to 873, the number of group headquarters from 29 to 27 and the complement from 25,000 to 12,500. I regret that upwards of 5,000 volunteers—to whose services I pay sincere tribute—will become surplus.

Mr. Buchanan-Smith: Is the hon. Gentleman aware that this news will be received by the Royal Observer Corps throughout the country with some sorrow? Is the volunteer spirit in the Royal Observer Corps to go the same way as the T.A. and the Civil Defence and be treated like that?

Mr. Rees: The Royal Observer Corps is to be kept, though at a reduced number. I would point out to the hon. Gentleman, who comes from Scotland, that in Scotland our new establishment is 2,870, but the strength, as at 1st March, 1968, was 2,690.

Territorial and Army Volunteer Reserve, III

Mr. Ramsden: asked the Secretary of State for Defence whether, in the light of the recent official United States reappraisal of the need for reserve forces in the North Atlantic Treaty Organisation, he will now reconsider the decision to disband the Territorial and Army Volunteer Reserve, Category III.

Mr. Powell: asked the Secretary of State for Defence if, in the light of further assessments of defence needs, he will now reconsider his decision to disband the Territorial and Army Volunteer Reserve, Category III.

Mr. Reynolds: No, Sir. As I explained during the recent debate on the Territorial Army we are now discussing with the Council of Territorial and Auxiliary Forces Associations ways and means of putting the Territorial and Army Volunteer Reserve, Category III on to a care and maintenance basis.

Mr. Ramsden: Are not two things clear: first, that the British Army will be the only major N.A.T.O. land component without the capability of putting a fresh formation in the field, if need be; and, secondly, that the British Government's thinking on N.A.T.O. strategy is seriously out of step with that of the Americans?

Mr. Reynolds: I am glad that the right hon. Gentleman has two points clear at least, but they did not seem so clear as he went along. We have a third division in addition to the normal forces assigned to SACEUR, and we have sufficient reserves to make sure those units are up to strength.

Mr. Powell: Will not the British Army be the only army in N.A.T.O. which has no capability of raising new formations in time of war?

Mr. Reynolds: The British Army will be the only army in N.A.T.O. which has the kind of first-class equipment which is being delivered to it. As the right hon. Gentleman's right hon. Friend will be aware, there are definite limits to the numbers of units which can be got across to Central Europe in the amount of time allowed for in all N.A.T.O. planning

Sir Frank Pearson: Can the Minister say whether the chief constables of counties and boroughs were consulted specifically before the decision to stand this force down?

Mr. Reynolds: No, Sir.

Mr. Allason: asked the Secretary of State for Defence what would be the cost of retaining the Territorial and Army Volunteer Reserve, Category III, without pay or allowances.

Mr. Reynolds: About £2·2 million if other costs remain the same.

Mr. Allason: Is the Minister satisfied that this is a useful saving in view of the loss of this very valuable Reserve at a time when our Regular forces are being reduced?

Mr. Reynolds: Something up to £3 million is a useful saving. I should not have thought there was any doubt about that. I must stress that the T & AVR III is not a Reserve for the Regular Army.

Sir Knox Cunningham: Why are the Government always trying to knock voluntary service in the forces?

Mr. Reynolds: As was pointed out in the debate a little while ago, the Territorial Army, or what is now derived from it, still exists in considerable numbers and has better equipment than before. It was knocked in preceding years by being starved of equipment. It was hon. Gentlemen opposite who abolished the R.A.F. Reserve many years before.

Mr. Ramsden: Has not the British Army been well served in the past by the policy of having a lot of relatively inexpensive Reserves rather than a few pretty expensive ones? Might not, especially in the European context, the situation be reviewed with that in mind?

Mr. Reynolds: This is completely different from the view that the right hon. Gentleman took only four years ago when he was responsible for running the Army and the Army Reserves. We have in the past had large numbers of men with no equipment for them. The trouble with hon. Gentlemen opposite is that they are always trying to fight the war before last.

Mr. Goodhart: asked the Secretary of State for Defence what discussions he

has had with members of the Council of the Territorial and Auxiliary Forces Association about the decision to disband the Territorial Army and Volunteer Reserve Category III.

Mr. Reynolds: I have nothing to add to my statement on 6th March.—[Vol. 760, cols. 466–568.]

Mr. Goodhart: In these discussions, will the hon. Gentleman remember that the money being spent on the cancellation charges for the F111 would keep the Territorials at their present level for 20 more years, and that, if he decided to retreat on this front, he would receive much praise?

Mr. Reynolds: I find it difficult to do mental arithmetic when the amount involved is unknown, as in this case.

Sir T. Beamish: During these discussions, is the hon. Gentleman bearing in mind the N.A.T.O. Ministerial communiqué of last December to which the Secretary of State subscribed stressing the growing importance of civil emergency planning? How can the disbanding of the Territorial Army be squared with this promise which the right hon. Gentleman must have given in December?

Mr. Reynolds: We discussed this in our debates on Civil Defence and the Territorial Army.

Regular Army Reserve

Mr. Allason: asked the Secretary of State for Defence what will be the strength of the paid Regular Army Reserve in 1968, 1970, 1972 and 1974.

Mr. Boyden: The planned strength of Sections A, B and D of the Regular Reserve up to 1974 is as follows:

1968
36,500


1970
46,000


1972
47,000


1974
50,000

Mr. Allason: Is the Minister satisfied that these increases are adequate in view of the very severe run-down of the Regular Army and also of the Territorial Army? Is he sure that he has enough, or ought he not to look for further sources of Regular Reserves?

Mr. Boyden: Yes, Sir. No, Sir.

Nuclear-powered Submarines

Mr. Wall: asked the Secretary of State for Defence if he will make a statement on the proposed future programme for fleet hunter-killer nuclear-powered submarines.

Mr. Powell: asked the Secretary of State for Defence whether it is still his policy that the main striking power of the Royal Navy should be provided by nuclear-powered submarines; and whether he will now reconsider his decision to reduce the proposed rate of construction of these submarines.

Mr. Healey: Nuclear fleet submarines will provide the main striking power of the Royal Navy against surface ships and submarines. As to their rate of construction, I have nothing to add to what the Prime Minister announced on 16th January.—[Vol. 756, c. 1583.]

Mr. Wall: The Prime Minister indicated that the rate of construction would be cut down. As the Answer earlier by his right hon. Friend indicates that this will be the only answer to the Soviet missile-firing destroyers, would it not be more advisable to speed up construction

Mr. Healey: With respect, nobody suggested that this would be the only answer to the Soviet missile-firing destroyers. I heard my right hon. Friend deal in great detail with airborne answers to the Soviet missile-firing destroyers.
The fact is that we now have four nuclear fleet submarines either on order or building, making a total of seven, including the first of a new class. In the light of the very substantial reduction in our defence commitments, we believe that it will be possible and necessary to reduce the rate of building after that.

Mr. Powell: If the right hon. Gentleman does not know the size of the nuclear-powered submarine fleet at which he is aiming and the date at which he wishes it to be of a given size, how could he agree with his right hon. Friend stating that the rate of construction was to be cut down? Is not this a Defence Review in reverse?

Mr. Healey: I think that before the right hon. Gentleman gets too excited he

must, on reflection, recognise that I am satisfied about the reduction in the rate of building. I know what the rate is, but, like all previous Defence Ministers, I am not prepared to announce future building intentions either regarding these ships or any others. No Government have ever done this. I am satisfied that some reduction will be possible. Precisely what reduction, I shall be announcing later in the year.

Mr. James Davidson: Has the right hon. Gentleman any idea how many nuclear-powered submarines the Soviet Navy possesses?

Mr. Healey: Yes, Sir, but I would need notice of the question if the hon. Gentleman wanted me to go further and give an estimate.

Mr. Powell: How is the right hon. Gentleman going to state the reduction later in the year if he is neither going to state the previous nor the subsequent rate?

Mr. Healey: This mystery will be clear to the right hon. Gentleman when I make my announcement.

Scout Group, Eltham (Army Interrogation Exercise)

Mr. Lipton: asked the Secretary of State for Defence if he will investigate the circumstances in which a group of scouts from Eltham, Kent, took part in an interrogation exercise with the 43 Army Youth team; and if he will make a statement.

Mr. Boyden: Eleven Royal Eltham Scout Group asked 43 Army Youth Team to take part in this exercise and the officer commanding the Team agreed to do so. The leader of the scout group has since written to thank the Youth Team for the help they gave.

Mr. Lipton: Was not this exercise rather too brutally realistic if it involved 10 scouts spending four hours in the middle of the night in underground cells where they were grilled and threatened by soldiers? Is it not a fact that one 16-year-old scout fainted at a particularly gruesome stage of the proceedings?

Mr. Boyden: The boy referred to was dizzy for a few seconds. When he was


told that the exercise was simulated, he recovered very quickly. In fact, the scoutmaster asked for this programme, and it was approved by the district commissioner. The parents of the boys had been notified, and they certified their assent in writing. None of the boys, nor the parents of the boys who took part, has made any complaint, and the sole record is a very warm letter of thanks from the scoutmaster.

Singapore

Mr. Goodhew: asked the Secretary of State for Defence whether, in view of the recent intensification of hostilities in Vietnam, he will now reconsider his decision to withdraw all British forces from Singapore in 1971.

Mr. Healey: No, Sir.

Mr. Goodhew: As we all know that it takes about six weeks at the jungle training school to fit any troops for activities in places like Malaysia, may I ask the right hon. Gentleman what measures he is taking to ensure the credibility of our capacity to meet the commitments which we still have in Malaysia, Singapore, and even Hong Kong?

Mr. Healey: That does not arise from the Question, but, as the hon. Gentleman has asked it, I remind him that I told the House during the defence debates a fortnight ago that we plan to have regular training exercises in these types of conditions, probably in Singapore and Malaysia themselves, after our withdrawal from the areas is complete.

Mr. Goodhart: Are there any circumstances under which the Government would reconsider their decision to leave Singapore, and if so, what are they?

Mr. Healey: I cannot conceive of any Government decision which is not capable of being reviewed under some circumstances, and when I reflect on the enormous number of changes in the policy of the party opposite during the 13 years when they were in power I am fortified in that belief. I know that the hon. Gentleman, who no doubt asked that question in a frivolous manner, will recognise that to speculate on such conceivable circumstances would not really be conducive to the conduct of Parliamentary business.

Sir J. Rodgers: asked the Secretary of State for Defence what discussions he

has had with the Australian, American and Singapore Governments about Australians and Americans using the facilities of the United Kingdom base at Singapore, subject to the Singapore Government's agreement.

Mr. Healey: We are naturally in constant touch with our Commonwealth partners about defence matters of common interest, but we have not yet had an opportunity to discuss this question comprehensively with them against the background of our recent decision to withdraw from Singapore and Malaysia by the end of 1971. I have had no such discussions with the United States Government.

Sir J. Rodgers: Would the right hon. Gentleman consider initiating such discussions, particularly with the United States?

Mr. Healey: Discussions are proceeding with our Commonwealth partners, Australia and New Zealand, about the possible use of these facilities. It would not be open to us to initiate discussions with the United States Government without the agreement of the countries directly concerned, and they are sovereign Powers in Malaysia and Singapore. I have no evidence whatever to suggest that they would wish us to initiate such discussions.

Mr. Powell: Has the right hon. Gentleman anything further to say about the proposal for a five-Power defence conference affecting this area?

Mr. Healey: All that I can say about that at the moment is that some contacts on this matter will take place between my right hon. Friend the Commonwealth Secretary and Ministers of the other Governments concerned during the S.E.A.T.O. conference next week; but I hope that it will be possible to hold a five-Power conference of the type suggested by the right hon. Gentleman early in the summer.

Voluntary Service Personnel (Training)

Dr. David Kerr: asked the Secretary of State for Defence whether he will now make available currently unused resources of his Department for the purpose of training voluntary service personnel seeking to work in socially useful projects either at home or overseas.

Mr. Boyden: As I announced in the debate on Army Estimates on 7th March, we are studying how the Armed Forces could, consistently with their own training needs, improve the help they give the civil community. I must, however, dispel any impression that we have unused resources available for this.

Dr. Kerr: Is my hon. Friend not anxious to preside over a beating swords into ploughshears programme, and one of the useful things which Army and other Forces' experience could provide is help for youngsters going overseas to territories known to our Armed Forces to understand better the kind of conditions which they could find, and the kind of constructive activity in which they will be engaged?

Mr. Boyden: That is a constructive suggestion. It is the sort of thing that we are following up. As far as the Army is concerned, with voluntary service it is better for the Army to give support rather than to take the lead.

Mr. Lubbock: Under the policy of military aid to the civil community to which the hon. Gentleman refers, will he consider making available the services of the Royal Engineers for the building of houses required for the Forces' families coming home?

Mr. Boyden: There is no need for that at all.

British Army of the Rhine

Dr. David Kerr: asked the Secretary of State for Defence what proposals he now has for reducing the manpower of the British Army of the Rhine.

Mr. Ronald Atkins: asked the Secretary of State for Defence what further plans he now has for withdrawing units of the British Army of the Rhine.

Mr. Healey: I have nothing to add to my reply to my hon. Friend, the Member for Wandsworth, Central (Dr. David Kerr) and the hon. Member for St. Albans (Mr. Goodhew) on 14th February, 1968.—[Vol. 758, c. 1340.]

Dr. Kerr: At the risk of appearing to nag, may I ask whether my right hon. Friend will accept that to many of us the continued existence of the B.A.O.R. is assuming a much greater political than

defence significance, and that many of us feel that it is tied to a policy of entry into Europe which some of us still find quite unacceptable? Will my right hon. Friend reconsider this?

Mr. Healey: I have always found my hon. Friends united on one thing, and that is that defence should be the servant of foreign policy, and not its master.

Mr. Shinwell: Can my right hon. Friend give any valid reason why the United Kingdom should make a larger contribution in manpower and in modern equipment than any other country associated with N.A.T.O., apart from the United States? Has my right hon. Friend observed the recent speech by Field Marshal Lord Montgomery, who is an expert in these matters, in which he suggested that at most we should retain only a division in N.A.T.O.?

Mr. Healey: With respect to my right hon. Friend, who knows a great deal about these matters, it is not the case that we are making a bigger contribution in manpower than any other member of N.A.T.O. The German contribution is a good deal larger than our own. I have read with interest the speech of the noble Lord, to which my right hon. Friend referred. One of the things which has comforted me since I have been Defence Secretary is to find that military experts tend to disagree with one another just as much as economic experts or any other experts do.

Mr. Ramsden: Is the right hon. Gentleman aware that the assurance which we should like to have is that there will be no further withdrawals, and that this question will not be subject to conditions as regards the achieving of a future offset agreement?

Mr. Healey: I am well aware that that is the right hon. Gentleman's view.

Service Land, Portsmouth

Mr. Judd: asked the Secretary of State for Defence what requests he has received in the past three years from Portsmouth City Council for the release of Service land for housing, industrial, commercial and other purposes; and what reply he has sent.

Mr. Reynolds: During past years there have been frequent contacts with the


Portsmouth City Council about the release of Service land, with the result that a considerable acreage has already been sold or offered for sale.

Mr. Judd: Is my right hon. Friend aware that there is some evidence that industrialists have been turned away from the city because of a shortage of land there? Can my right hon. Friend assure us that he will look to the economic and social needs of the community as a whole, and not primarily to the convenience of the Services in this matter?

Mr. Reynolds: I shall look primarily to the efficiency of our forces in this matter, but about 250 acres have been sold to the city corporation during the last three years, and 290 acres are at present on offer.

Royal Dockyards

Mr. Judd: asked the Secretary of State for Defence what discussions he has initiated with other appropriate Government Departments, local authorities and all other interested parties about the reducing task of the naval dockyards in the 1970s.

Mr. Foley: As I explained in the Defence (Navy) Estimates Debate on 11th March we are carrying out a study to determine the effects on the Royal dockyards of the cuts in defence expenditure announced on 16th January. We have not reached the stage when it would be appropriate to initiate discussions with others concerned.

Mr. Judd: In view of the outstanding service to the nation by these communities in the past, would not my hon. Friend agree that it would be disastrous if they were presented with an administrative fait accompli? Will my hon. Friend give an assurance that there will be full consultation with local authorities and other Government Departments on the most productive possible use of human and physical resources?

Mr. Foley: Yes, Sir.

Mr. Wingfield Digby: Is the Committee considering doing more shipbuilding, as opposed to ship repairing in the Royal dockyards?

Mr. Foley: This is a continuing aspect of the examination of the work of the dockyards to see what they can do and what must be put to outside contract.

Recruitment (Advertising Expenditure)

Mr. Cordle: asked the Secretary of State for Defence how much was spent on advertising to encourage recruitment in the Armed Forces in 1967; and how much he estimates will be spent in 1968.

Mr. Reynolds: About £3 million in 1967–68; I estimate that we shall spend about the same in 1968–69.

Mr. Cordle: Does the right hon. Gentleman think it is enough, in view of the Government's policy to discourage recruitment?

Mr. Reynolds: It is never enough, but it is the amount of money that we expect to spend at the present moment.

Aircraft Accident, Harty Ferry (Radar Track)

Mr. Boston: asked the Secretary of State for Defence whether the aircraft which crashed at Harty Ferry, Kent, on Friday, 16th February, 1968, was tracked by his Department's radar establishments.

Mr. Merlyn Rees: No, Sir. The tracking of aircraft coming from this direction is given a relatively low priority. Warning against a possible threat across Continental N.A.T.O. territory is, of course, provided by the integrated N.A.T.O. Early Warning Radar System.

Mr. Boston: Does my hon. Friend recall that there was considerable concern and interest in this incident, partly because of the very wild and unsubstantiated statements about smuggling activities? Can he say who is responsible for matters involving illegal intrusion by civil aircraft, whether there is any contact between his Department and any other Department, and, finally, whether he thinks that any other safeguards are needed?

Mr. Rees: While the Minister of Defence retains responsibility for the air defence of the United Kingdom, responsibility for all aircraft not engaged on defence tasks is vested in the Board of Trade. In practice, the two systems work


very closely together. I think that the last part of the question would have to be addressed to my right hon. Friend at the Board of Trade.

Persian Gulf (British Forces)

Mr. Goodhew: asked the Secretary of State for Defence, whether, in view of the renewed hostilities in the Middle East, he will now reconsider his decision to withdraw all British Forces from the Gulf after 1971.

Mr. Healey: Nothing has happened which makes it necessary to reconsider the decision to withdraw our Forces from the Persian Gulf by the end of 1971.

Mr. Goodhew: Does the right hon. Gentleman not think that he might now make amends for his rather insulting broadcast, and accept the offer of the Sheikhs there to pay for some of our presence there, in view of the continuing unsettled state?

Mr. Healey: The hon. Gentleman is making a habit today of asking supplementary questions which have nothing to do with the initial Question. I will say again, as I and my colleagues have said before, that the offer which has been made by some of the Governments in the Gulf is not sufficient reason to cause us to reconsider our decision.

Sir T. Beamish: Does the right hon. Gentleman share the view of the right hon. Member for Belper (Mr. George Brown) that our withdrawal from the Gulf is dangerously fast?

Mr. Healey: No, Sir.

Shipyards (Naval Contracts)

Mr. Edward M. Taylor: asked the Secretary of State for Defence what was the total value of naval contracts placed by the Government in 1967; what percentage of this total was placed in Scottish shipyards; and what were the comparable totals and percentages in 1962 and 1957.

Mr. Mason: The total value of naval contracts placed by the Government with shipyards in the United Kingdom in 1967 was £46 million of which 14 per cent. was awarded to Scottish yards; the corresponding figures for 1962 were £33

million and 39 per cent., and for 1957, £45 million and 14 per cent.

Mr. Taylor: Will the right hon. Gentleman give an undertaking that he will maintain a high level of activity of naval building on Clydeside, in view of the serious order position on Upper Clydeside? Can he say anything about export orders for naval ships for foreign countries, in particular the Argentine contract which is pending?

Mr. Mason: I can say nothing on the last point. On the first, the Scottish yards are getting a fair share of the United Kingdom naval contracts. Indeed, if we take out the nuclear contracts, which seem to give Scotland a very low percentage, they have had an average 38 per cent. of all naval contracts other than nuclear over the past 10 years.

Mr. Hector Hughes: Why are all these contracts concentrated on South-West Scotland and lost to North-East Scotland, when Aberdeen has very good shipyards?

Mr. Mason: I only hope that my hon. and learned Friend can encourage his yards to be as competitive as those others.

Regimental Magazines (Censorship)

Mr. Biggs-Davison: asked the Secretary of State for Defence to what extent and on what occasions his department have directly or indirectly censored regimental magazines, and why.

Mr. Boyden: There is no censorship of regimental journals; but they must not contravene Queen's Regulations and the Official Secrets Acts.

Mr. Biggs-Davison: Was it with the approval or in any way on the instructions of the Ministry of Defence that an editorial was excised from The Globe and Laurel, the corps magazine of the Royal Marines?

Mr. Boyden: I will look into that: I have had no notice of it.

Sir H. Legge-Bourke: May we have an assurance that, if any reference is made in regimental magazines to the observations of the Secretary of State referring to hon. and gallant Members on this side as Hitler Youth, there will be no censorship?

National Servicemen (Desertion Charges)

Mr. Gurden: asked the Secretary of State for Defence whether he will abandon all charges for desertion against former National Servicemen, and grant amnesty in all these cases.

Mr. Reynolds: No, Sir. Desertion is a serious offence, and the Government cannot lightly declare any amnesty which would constitute an official pardon for evading a duty which most National Servicemen accepted as an essential service.

Mr. Gurden: Why not, since it will take about 20 years, at the present rate of discovery, to find all these men? Is the hon. Gentleman aware that the police are spending hundreds of hours arresting men and taking them long distances, only to find that they are all let off and discharged without penalty at the end of the day, which is a waste for the whole country?

Mr. Reynolds: I have considered all these matters, but I am not prepared to do anything at present.

Mr. Roebuck: Can my hon. Friend do anything to trace the right hon. Member for Wallasey (Mr. Marples)?

Armed Forces Overseas (Pay)

Mr. Hooley: asked the Secretary of State for Defence what limit is placed on the amount of pay which a member of the Armed Forces may spend overseas.

Mr. Reynolds: There is no limit for members of the forces who are serving on a tour of duty overseas of over four months. Personnel serving abroad for less than four months may draw their allowances for the period of duty in full; but they can normally only draw up to £10 a week or £2 a day whichever is the less.

Mr. Hooley: But since the 53 million citizens of this country who are not in the forces have recently been asked to accept very heavy burdens in the interests of the balance of payments, would my hon. Friend not look at this again to see whether some relief to the balance of payments would accrue by placing a modest limit on overseas expenditure by the forces?

Mr. Reynolds: I am not prepared to consider that members of the forces employed overseas should be dealt with differently from any other citizens who are employed temporarily overseas.

Rear-Admiral Morgan Giles: Is the hon. Gentleman still receiving many complaints about the local overseas allowance, or is everyone now happy about it?

Mr. Reynolds: It depends on what the hon. and gallant Gentleman means by "many". There have been some and I explained this in our debate last week. I also explained the detailed provisions in the debate which we had recently.

Microbiological Research Establishment, Porton

Mr. Hugh Jenkins: asked the Secretary of State for Defence whether he has studied a proposal, a copy of which has been sent to him, made at a recent international conference in London relating to the work of the Microbiological Research Establishment at Porton; and what action he proposes to take in this matter.

Mr. Mason: I assume that my hon. Friend is referring to the recent proposal for the work of the Microbiological Research Establishment to be declassified. I would refer him to my reply to my hon. Friend the Member for West Lothian (Mr. Dalyell) on 11th March.—[Vol. 760, c. 230.]

Mr. Jenkins: Can my right hon. Friend say how many of the doctors at Porton are concerned with developing methods of spreading disease?

Mr. Mason: No, Sir, I cannot give figures of the people working there, but as for the work itself, M.R.E. assesses the threat of biological warfare and seeks to find means to prepare a defence.

Civilian Employee (Reprimand)

Mr. Alexander W. Lyon: asked the Secretary of State for Defence whether he will reconsider the punishment awarded to a civilian official of his Department, Mr. W. G. Johnson of York, for disclosing to the Press arrangements for the preparation of transfers for the Services, in view of the fact that he did so with the intention of improving the efficiency of


the Service and with no hope of financial or other reward.

Mr. Boyden: Since I last wrote to my hon. Friend, I have learnt that Mr. Johnson admitted that his action was wrong and apologised. This makes it possible to take a more lenient view, and the financial punishment will now be remitted. The reprimand must stand.

Mr. Lyon: Is my hon. Friend aware that I am delighted with that Answer?

Mr. Boyden: indicated assent.

Nuclear Weapons

Mr. Hugh Jenkins: asked the Secretary of State for Defence whether nuclear weapons are targeted on centres of population or on nuclear bases.

Mr. Healey: The V-bomber force, which at present represents our contribution to the collective Western strategic nuclear deterrent, is assigned to N.A.T.O. and targeted in accordance with N.A.T.O. requirements. The same will be true of the Polaris force when it comes into service.

Mr. Jenkins: Is my right hon. Friend aware that that is an extremely vague Answer—I suspect intentionally so? Is he further aware that, according to American strategic thinking, it is now suggested that nuclear weapons should be targeted on civil centres of population rather than upon nuclear bases? Has he any comments on this?

Mr. Healey: With respect to my hon. Friend, his description of American strategic thinking is very far from the truth, though I am sure that hon. Members must know that the circumstances in which strategic nuclear weapons would be used would inevitably involve catastrophic suffering for both civilian and military personnel on both sides, and this is one of the reasons why we expect that these circumstances will never arise.

Mr. A. Royle: Is there a separate British targeting plan?

Mr. Healey: I think that I have already given some answer on this question, but I am not prepared to discuss contingency plans at all in this House, and no one would expect me to do so.

Officers (N.A.T.O. Headquarters)

Mr. Shinwell: asked the Secretary of State for Defence how many British officers are seconded to the North Atlantic Treaty Organisation headquarters; what is the number representing other North Atlantic Treaty Organisation countries; and what is the annual cost to the United Kingdom and other countries, respectively.

Mr. Reynolds: I can only answer for the United Kingdom contribution. The number of British officers seconded to the N.A.T.O. Headquarters is 520 at an annual cost of £2,365,000.

Mr. Shinwell: When will we put a stop to this expensive and unnecessary luxury? Why should the headquarters department have such a conglomeration of air marshals, admirals and generals who have nothing to do? What are they planning for, anyway? Why do we not put a stop to this nonsense?

Mr. Reynolds: I do not think that it has changed a lot in the last 16 years, but we said in the White Paper that the foundation of our security, now as always, lies in the maintenance of peace in Europe, and we must make our full contribution towards this.

Mr. Powell: Has the hon. Gentleman any idea whether the proportion which our contribution bears to our total contingent is higher or lower than that of other countries? Will he look into the matter?

Mr. Reynolds: I will certainly look into the matter.

Riot Control

Mr. Goodhart: asked the Secretary of State for Defence whether he will ensure that all units stationed in this country are trained in riot control.

Mr. Healey: That is a normal part of the training of the appropriate units of all three services.

Mr. Goodhart: Is the right hon. Gentleman aware—I am sure that he must be—that if the present wave of irresponsible violence continues the police may be unable to cope without imposing an undue strain on the force? This being


so, would it not be best for us now to prepare to give aid to the civil power?

Mr. Healey: Naturally the Services are always prepared to give aid to the civil power if the circumstances justify that being done, but I must remind the hon. Gentleman that both I and the right hon. Member for Wolverhampton, South-West (Mr. Powell) were recently subjected to a demonstration of flower power and that both of us survived with our faculties unimpaired, despite the fact that there was no assistance from the military.

Sir Knox Cunningham: Would it not be wise to concentrate on this sort of training in view of the extreme belligerency of peace?

Gan Landing Field

Sir J. Rodgers: asked the Secretary of State for Defence what discussions he has had with the Australian and American Governments about the use of the Gan landing field in the future.

Mr. Healey: None, Sir.

Sir J. Rodgers: Is it not a fact that the United States were greatly disconcerted by our precipitate announcement of our withdrawal east of Suez, and do not we owe it to our Commonwealth partners, particularly Australia and New Zealand, to help them in their defence programmes?

Mr. Healey: That has nothing whatever to do with the Question, but if the hon. Gentleman is interested in the Question which he tabled, he should know that it is not open to us to invite any Government to make use of facilities at Gan. This would require a revision of the treaty, in virtue of which we have facilities there.

Portugal (Supply of Arms)

Mr. Hooley: asked the Secretary of State for Defence why he refuses to disclose the value of arms supplied by Great Britain to individual countries; and if he will make an exception in the case of Portugal, in view of their breach of sanctions against Rhodesia.

Mr. Healey: As explained several times in the past, to disclose details about arms sales could indicate some aspect of the purchasing Government's defence

arrangements. In the case of Portugal, the export of defence equipment is restricted to its reasonable requirements as a N.A.T.O. ally.

Mr. Hooley: Since Portugal is pursuing a policy which is deliberately calculated to undermine a major aspect of Her Majesty's Government's foreign policy—namely, sanctions against Rhodesia—would it not be in the public interest for us to be told exactly what arms are being supplied to Portugal to enable that country to carry out this policy?

Mr. Healey: The policy of Her Majesty's Government is in line with the Security Council Resolution of 31st July, 1963. We do not supply arms for use in Portugal's overseas territories, nor is there any evidence that arms have been transferred to Rhodesia.

Mr. Clark Hutchison: Is a deal likely to come off with the Argentine for naval or other ships? If so, is the right hon. Gentleman aware that this may have something to do with the future of the Falkland Islands?

Mr. Healey: That supplementary question has absolutely nothing whatever to do with the Question, but the hon. Gentleman may be interested to know that we are in contact with the Argentine Government about the possible sale of ships.

Mr. Michael Foot: Can my right hon. Friend say how recently there was a review of the question of whether any arms supplied to Portugal were being used in South Africa, particularly in view of the most startling revelations in The Times recently of the co-operation among the Portugal, Rhodesia and South African Governments in their pursuit of the suppression of the people of Africa?

Mr. Healey: These matters are continuously under review.

Mr. Goodhew: Is the right hon. Gentleman aware that the people of this country who are being required to pay yet another £923 million a year in taxation to try to get the balance of payments right will take a very poor view indeed of any further Government restrictions on sales abroad?

Mr. Healey: I have always been slightly doubtful of the hon. Gentleman's qualifications to speak for the people of this country.

Oral Answers to Questions — RAILWAYS

Superannuitants

Mr. Gower: asked the Minister of Transport if she will give a general direction to the British Railways Board to take action at an early date to alleviate the position of former employees of former railway companies, such as the Old Barry Railway Company Limited, who continue to be paid by the Board pensions which amount to only shillings per week, and which have not been increased to reflect the reduced value of money.

The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Neil Carmichael): No, Sir.

Mr. Gower: Is the hon. Gentleman aware that his Department's refusal to do anything about these pensions is inconsistent with the fact that some railway pensions have been increased, that pensions like these are supplemental to the retirement pension and that these very small pensions have not been changed for many years?

Mr. Carmichael: Any change in the level of pensions is first a matter to be decided by the British Railways Board and the Ministry, and my right hon. Friend comes into the picture only when the Board has decided to place a decision about proposals before her.

Oral Answers to Questions — TRANSPORT

Transport Charges, Scotland

Mr. Wolrige-Gordon: asked the Minister of Transport what proposals she has for lowering transport charges in Scotland; and if she will make a statement.

Mr. Carmichael: The Government's proposals in the Transport Bill will provide a more efficient and economic transport system to the benefit of the whole country. Alterations in charges are matters for the operators concerned, subject to the guidance and controls of prices and incomes policy.

Mr. Wolrige-Gordon: Is the hon. Gentleman aware that, although two of the worst provisions in the Transport Bill

were excised yesterday, nevertheless the consequent enormous rise in taxation on transport and freight charges will greatly increase industrial costs in Scotland? Is he further aware that some of the worst provisions of this Measure still remain? Will he particularly direct his attention to the 100-mile limit, which makes no sense whatever in Scotland?

Mr. Carmichael: Yesterday's announcement by my right hon. Friend the Chancellor of the Exchequer of increased taxation did not apply to only the freight and transport industry. To answer the hon. Gentleman's question about the 100-mile limit, we believe—and hon. Members have discussed this at great length—that the National Freight Corporation will be in a position to offer customers in certain areas cheaper door-to-door rail services; but to obtain these efficient services we consider that the 100-mile limit is, from the national point of view, imperative.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Wood Pigeons (Damage to Brassica Crops)

Mr. Hastings: asked the Minister of Agriculture, Fisheries and Food whether he will initiate action to control wood pigeons in areas where brassica crops predominate.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): I sympathise with growers whose brassica crops are suffering severe damage by wood pigeons and our officers are always ready to advise on control measures. But the responsibility for controlling pests lies with the occupier and not with the Ministry. Unfortunately, there is no simple solution to this problem.

Mr. Hastings: While I am aware that there is no simple solution to this problem, may I ask the hon. Gentleman if he is aware that his Answer will give little comfort to growers in my constituency? Is he further aware that damage to these crops—particularly spring greens and Brussels sprouts—has averaged out at £30 an acre, and in some cases far more than that? Does he recognise that at this


time of year there is a particular threat to brassica crops and that something has got to be done to solve this problem?

Mr. Mackie: I have a great deal of sympathy with the problem raised by the hon. Gentleman and I assure him that we are doing a good deal of experimental work, particularly in the development of stupefying baits and so on. We are not doing that in his constituency at the moment, but we hope that something will come out of the work that is going on and that it will be of great help to farmers.

Retail Beef Prices (Scotland)

Mr. William Hamilton: asked the Minister of Agriculture, Fisheries and Food if he will initiate an independent inquiry into the retail price of beef in Scotland, in view of its continuing escalation.

Mr. John Mackie: No special inquiry is needed, for the factors that must affect retail meat prices are well known, and we watch them closely. For example, certified cattle at auctions in Scotland have recently been costing buyers some 40 per cent. more than six months ago; and retail prices have been affected to the extent that individual traders, whether in Scotland or elsewhere, have not found it possible to absorb such cost increases.

Mr. Hamilton: Does my hon. Friend think that the decision to allow the import of beef from the Argentine will favourably affect the price of beef to the consumer in Scotland and the United Kingdom generally? Is he satisfied that the retail margins of retailers in Scotland are more than sufficient?

Mr. Mackie: As the hon. Gentleman will appreciate, it is natural that any increase in beef supplies helps to keep prices reasonably level. To answer the second point of his supplementary question, as I said earlier, we keep a close watch on retail margins; and so far we do not think that they are too high in the area he mentioned.

Mr. Noble: Can the Minister say what percentage of beef from the Argentine is at the moment going to Scotland?

Mr. Mackie: Not at the moment.

CHINA (DETAINED BRITISH SUBJECTS)

The following Question stood upon the Order Paper:

Mr. A. ROYLE: To ask the Secretary of State for Foreign Affairs if he will make a statement on the detention of Mr. Watt, a British citizen working on an industrial project in the People's Republic of China.

The Secretary of State for Foreign Affairs (Mr. Michael Stewart): With permission, Mr. Speaker, I would like now to reply to Question No. 77.
Mr. Watt is employed by Vickers-Zimmer Limited, who have a contract to erect a plant at Lanchow in China. He was detained in an hotel there on 26th September, 1967, and despite repeated and vigorous representations by our Mission in Peking and inquiries by the company, the Chinese authorities gave no official intimation of the charges against him.
On 12th March, the Chinese New China News Agency reported that Mr. Watt and Mr. Deckart, a German national working for the same company in Lanchow, had been held on charges of espionage and, on 16th March, that Mr. Watt had been sentenced to three years' imprisonment and Mr. Deckart to deportation. The British Charge d'Affaires has again approached the Chinese for details of the charges and of the trial and for consular access. We regard this course of events as deplorable and we shall do all we can to help Mr. Watt.

Mr. Royle: Is the Secretary of State aware that this is another instance of disgraceful treatment of British subjects in China, and that apparently no efforts have yet been made to get consular access to another British subject, Mr. Grey, who is also under detention in Peking? What action is to be taken in this case?

Mr. Stewart: We are attempting to get consular access to him.

Sir Alec Douglas-Home: May I welcome the right hon. Gentleman back to office? This is a serious matter, because there have been two British subjects detained in a matter of weeks. Will he


make the strongest possible representations to the Chinese, because this is a situation which cannot be tolerated and there must be some retaliatory action taken if this is to go on?

Mr. Stewart: Yes, Sir, we shall do everything we can and everything that is appropriate that might help either of these British subjects. The right hon. Gentleman spoke of retaliatory action. I am sure he will understand that one would have to consider when a suggestion of that kind was made whether it would be appropriate and whether it would help.

Mr. Hastings: Is it not up to the Foreign Secretary to consider what should be done about the retaliatory action and not to leave it to others to suggest it in these circumstances?

Mr. Stewart: I do not think the hon. Member understood what I was saying. In events like this the question of retaliatory action is nearly always made from every quarter, but we did consider this. I said that in the consideration of that one has to ask very carefully whether such action would be helpful.

Mr. Cronin: Is it not plain that there is no effective retaliatory action which my right hon. Friend can take and his energies might be much more usefully employed by warning people against travelling in such countries?

Mr. Stewart: Only a limited number of business men travel to China, and most of them are experienced in the hazards and risks of so doing. I agree with my hon. Friend that people travelling to China who are not experienced

would be well advised to consult me or my Department before they go.

Mr. Eldon Griffiths: Has the right hon. Gentleman personally sent for the Chinese representative in London and put to him generally the strong feelings of the British people about their fellow citizens being mistreated in this fashion? Will he personally undertake to see the Chinese Chargé d'Affaires to express the feelings of this House?

Mr. Stewart: I have not myself taken that action yet—[HON. MEMBERS: "Why not?"]—but Her Majesty's Government of course—

Sir G. Nabarro: Why not? Or did George do it as a valedictory act?

Mr. Stewart: The hon. Member should realise that this is a serious matter. If that or any other action seems likely to help these men, we shall certainly take it.

Sir A. V. Harvey: Will the Foreign Secretary not agree that this Government and previous Governments have encouraged trade with China? The balance of trade is in favour of China. Will he point out in the strongest possible terms that if they want this to continue British people have to be treated reasonably?

Mr. Stewart: That is one possible line of action, but I have to consider whether that would help in this case. As the House knows, our relations with China, and, of course, not only our relations but those of most other countries, have been bad, particularly during the period of the excesses of the Red Guards. There are some signs—I say this with caution—of a slight improvement and it is possible that that trend may continue.

BILLS PRESENTED

AIR CORPORATIONS

Bill to raise the limits imposed by section 22 of the Air Corporations Act 1967 on the amounts which the British European Airways Corporation may borrow to authorise the Corporation to borrow from the Board of Trade for the purpose of financing deficits on revenue account and in order to repay sums borrowed for that purpose; and for purposes connected with the matters aforesaid, presented by Mr. Anthony Crosland; supported by Mr. Peter Shore, Mr. Anthony Wedgwood Benn, Mr. John Diamond, and Mr. J. P. W. Mallalieu; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 109.]

FAMILY ALLOWANCES AND NATIONAL INSURANCE (No. 2)

Bill to increase family allowances under the Family Allowances Act 1965 and make related adjustments of certain benefits under the National Insurance Act 1965 or the National Insurance (Industrial Injuries) Act 1965, to abolish entitlement to unemployment benefit, sickness benefit and injury benefit under those Acts in respect of the first three days of any period of interruption of employment, and for connected purposes, presented by Mrs. Judith Hart; supported by the Chancellor of the Exchequer, Mr. William Ross, Mr. Peter Shore, Mr. Ray Gunter, Mr. Cledwyn Hughes, Mr. John Diamond, Mr. Norman Pentland, and Mr. Charles Loughlin; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 110.]

EXPORT OF ANIMALS FOR RESEARCH

3.36 p.m.

Mr. Rafton Pounder: I beg to move,
That leave be given to bring in a Bill to prohibit the export of animals for vivisectional research abroad; and for purposes connected therewith.
I would like to make clear at the outset of my remarks that this Bill has wide support in all quarters of the House. This Bill is not a vivisectionist Measure. The important word is export rather than vivisection. The wide support which I have received from a large number of well-known and respected animal welfare organisations has transcended the boundaries of the traditional supporters and opponents of vivisection. I am pleased to include the full support of the R.S.P.C.A., S.S.P.C.A. and U.S.P.C.A. amongst the protagonists of my Bill, in addition to the British Council of Anti-Vivisection Societies.
I do not intend to enter into any of the ethical or medical arguments normally associated with discussions on vivisection. Such arguments are irrelevant to my Bill. This Bill has nothing to do with vivisection in this country, it is wholly concerned with animal exports.
What is my Bill? And why is it necessary? This Measure would, as I have already stated, prohibit the export of animals for vivisectional research
abroad.

Mr. Speaker: Order. It is difficult for an hon. Member to continue to speak against a background of conversation.

Mr. Pounder: Such a Measure is to my mind necessary because in no other country is there legislation comparable to the Cruelty to Animals Act, 1876. Although this Act is now over 90 years old, and is probably in need of revision particularly regarding the provision of adequate inspection of experiments, nevertheless, whatever its shortcomings, this Act is unique in the annals of animal legislation.
Section 3 of this Act states that
No experiment calculated to give pain shall be performed on a vertebrate animal without complete anaesthesia of the animal during the whole of the experiment, or without the animal being killed before recovery


from the anaesthetic if it is in pain or seriously injured".
The animal protection given by this Act is clear and humane, and has afforded just pride to research workers and to animal welfare societies alike.
Although some would contend that comparisons with other countries are odious, nevertheless I feel that consideration must be given to the fact that certain things, which would not be tolerated under the regulations applicable in this country, are practised with impunity in many parts of the world.
I do not wish to engage in emotionalism, but I feel that I should illustrate the point which I am endeavouring to make regarding practices abroad. I have in my possession a series of authenticated photographs of experiments conducted in a Japanese laboratory. Quite apart from the nauseating nature of the experiments depicted, the fact which is doubly distressing is that it is abundantly clear that none of the dogs shown in the pictures have been anaesthetised. This view is supported by a veterinary surgeon who carefully examined the pictures at my request.
Surely it is wholly undesirable that animals bred and reared in this country should be sold for use in foreign laboratories where the protection offered by British legislation does not apply. How extensive is the practice of exporting animals from the United Kingdom for vivisectional research abroad? Reliable figures are extremely difficult to obtain, and estimates of the number of animals involved fluctuate wildly. However, the value of these exports can be more accurately determined—it amounted to about £550,000 last year. These animals include rats, mice, hamsters, guinea pigs, rabbits, but also many dogs and cats.
This trade is growing. Of this there is no doubt. It is noteworthy in this context that one company's certificate of registration describes its activities as
the breeding of laboratory animals for research organisations mainly in Europe".
There are also other firms which export animals for research as a subsidiary activity. Their number is imprecise.
The most undesirable section of this animal export trade is the laboratory

animal dealer, the person who is sold unwanted pets, for which good homes are to be found, and who, despite promises to that effect, without further ado sells these erstwhile family pets to laboratories, often abroad. Time does not permit me to elaborate further.
Likewise, I am assured that if an advertisement appears offering to buy whole litters of puppies, it is a fairly reliable indication that the dealer is seeking to buy with sale for vivisection, often abroad, in mind. The fact that all the puppies in a litter are seldom of uniform excellence does not seem to concern the dealer. Recently I read an advertisement which sought to buy 1,600 beagles.
It has been contended that if this animal export trade was banned it would have an adverse effect on international medical research. My endeavours are not aimed at undermining medical research. I am, however, unimpressed by the argument that a scientist cannot accept the findings of a colleague but must conduct his own experiments and that, only if these research findings correspond, is he satisfied. This would appear to lead to seemingly unnecessary duplication of effort.
How could any ban be enforced? On the normal documents required for any exporting activity it would not be difficult to include a sentence stating that where animals are exported these creatures would not be used for vivisectional purposes. Likewise, it would not be too difficult to fine those who contravene such a regulation, in the same way as those who break any regulation can be called to account.
In conclusion, certain clear obligations devolve on anyone who uses animals in research work. He incurs a moral responsibility to justify his action, and a duty to limit pain and to give proper care. Abroad, there is no legislation anywhere requiring proper care of animals, nor inspection of experiments, nor any steps to limit pain.
The Littlewood Report states that the rôle of animal legislation is to prohibit objectionable activities. I feel that one such is the export of animals for research.
I commend my humble Bill as necessary to stop a growing and degrading export traffic. This Measure


is humane and reasonable; and it is one which I trust will meet with the approval of all Members of the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Pounder, Mr. Burden, Sir R. Russell, Mr. Bence, Mr. Hunt, Mr. L. M. Lever, Mr. Weatherill, and Mr. Bessell.

EXPORT OF ANIMALS FOR RESEARCH

Bill to prohibit the export of animals for vivisectional research abroad; and for purposes connected therewith, presented accordingly and read the First time; to be read a Second time upon Friday, 10th May, and to be printed. [Bill 108.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [19th March]

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.

Question again proposed.

Orders of the Day — BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.44 p.m.

Mr. Iain Macleod: Yesterday, the Chancellor of the Exchequer received a number of congratulations on his 2¼-hour speech, some for what was in it and all, I think, for the manner in which it was delivered. Everybody would wish to acknowledge—I do so at the outset of my speech—that the right hon. Gentleman had an exceptionally difficult task this year, and that this Budget is one of crucial importance for the British economy and for the British people.
There were many distractions in the last few days while the Chancellor was preparing his speech—from the international scene to the Belper explosion at home. All these matters no doubt distracted the Chancellor to some extent. Before the Chancellor's speech got submerged, as all Budget speeches do, in torrents of figures and proposals, there was a lucid elegance about the phraseology which reminded me very much of Mr. Harold Macmillan's Budget speech in 1956. You, Mr. Speaker, will remember that Mr. Macmillan had time to introduce only one Budget before he became Prime Minister. At least with all my heart I can say to the Chancellor that I hope he will introduce only one Budget. One like yesterday's was too many.
I start, as did the Chancellor, with the international crisis that ended with the


Washington communiqué. Some anger was expressed by hon. Members opposite when my right hon. Friend the Leader of the Opposition linked the events of last week with the devaluation of sterling. It was not my right hon. Friend the Leader of the Opposition but the Secretary of the American Treasury who said in the week after the devaluation of sterling:
The dollar is now in the firing line.
The clearest evidence of the link comes, not from the Opposition Front Bench, but from the Quarterly Bulletin of the Bank of England, from which I propose to read four very short sentences. This Bulletin is for March, 1968, before the crisis actually broke:
The shock of devaluation was followed by a period of upheaval and rumour in foreign exchange and gold markets … Immediately after devaluation pressure on the dollar became very heavy, and there were periods of unprecedented demand for gold … Demand for gold grew heavy early in November, for there was much uneasiness about the stability of both reserve currencies. In the week after the devaluation of the pound, speculative pressure against the dollar intensified".
This is an obvious point, because, if there are two reserve currencies in the world and one of them is linked to gold, if one is swamped the other is almost bound to ship some water. It became quite clear—it certainly did to me, and I have no doubt that it became even clearer to the Chancellor, who has wider sources at his disposal—on Wednesday night that the Basle communiqué and the words of the Governor of the Bank of England had been brushed aside.
I find that I have come increasingly to distrust communiqués that are bound to be reassuring. When one of my colleagues asked me to state my opinion of the Basle communiqué, I replied that if I suddenly read in a newspaper an announcement to the effect that there was no need to worry at all about auntie's health, I started worrying, not stopped worrying, as a result of that announcement. There is no question that in those days, particularly on Thursday, sterling took a tremendous hammering. It had to be supported heavily, and the world bankers had to meet at Washington.
I was surprised when I questioned the Chancellor on Monday of this week to learn that he seemed to regard the two-tier system not only as the right answer now, which I do, but also as permanent.

As far as I know, no one else seemed to take that view. My view is that it is the right solution because it keeps all the options open.
This leads me to give a warm welcome to what the Chancellor said yesterday about the scheme for special drawing rights, which was so actively pursued, with support from this side of the House, by the previous Chancellor—the present Home Secretary. There was an earlier initiative along not dissimilar lines taken by my right hon. Friend the Member for Barnet (Mr. Maudling) when he was Chancellor of the Exchequer. So I welcome and support what the right hon. Gentleman said yesterday. It is good to hear that there may be a Bill in this Session. It will be one of the few Bills which I shall welcome.
In his first major speech after becoming Chancellor at a bankers' dinner in London, the right hon. Gentleman said that he had no intention of presiding over a slither. Yesterday, his Budget certainly lived up to the description "brutal" which had been forecast for it by, I think, the President of the Board of Trade. I think that people's anxieties, as they absorb all the mass of detail, as we have tried to do since 3.30 yesterday, will be not whether the slide or slither has been checked, but whether there is at least a possibility—to use the revolting jargon of the day—that there was a measure of over-kill in the Chancellor's proposals.
In spite of the firmness of his Budget, I regard "presiding over a slither" as an exact description of what happened between devaluation and the time when the right hon. Gentleman rose yesterday in the House of Commons. In the Letter of Intent, which we all know so well, it was said in paragraph 7:
The Government are satisfied that the measures announced on 18th November, 1967, will bring about a sufficient shift in resources in the coming months to go a very long way towards achieving the improvement needed to achieve their balance of payments objective.
The Letter of Intent went on to say that the next review of the position would be in February and that further decisions could be taken at that time. As we all know, the measures taken on 18th November were quite inadequate. This became apparent within a very few days from the reactions of markets and people


all over the world to confidence in sterling. There was no possibility of waiting until the February review. The slither was on. So we came to the January cuts, and all the panic which surrounded them.
One of the principles which guided those cuts, as far as I can make out, is that the cuts should have been spread evenly between Departments. I read, for example that the Minister of Health, in a private meeting upstairs, defending prescription charges—as the House knows, I am in favour of them—said that the only alternative was a cut in the hospital building programme. Why on earth should that be so? Why should one have equal shares and no sense of priorities between the various programmes which the Government have put forward? If one wants an alternative to the prescription charges—which I do not—why not find it outside the Health Service, say, in the reduction of the number of civil servants, or in any other sector which people may wish? However, wherever one takes one's priorities, it is economic nonsense to say that every Department, however important it may be to the country's purposes and the Government's purposes, shall bear an equal share of the cuts.
Everyone knows that that rag-bag of cuts, which came to £300 million—of which about £100 million was "phoney"—has been hawked around by the Treasury for years. There was nothing new, or very little, in those proposals. So, once more, just as after devaluation, sterling fell and equities soared. Today, at least, we can say that both have gone up. But, one of these days, a statue will be erected in Throgmorton Street to Socialist Chancellors of the Exchequer.
The slither again was on, and it led directly into the spending spree, to which the Chancellor made no reference yesterday. There were several occasions during Tory years when representatives of retailing and other interests used to come to the Tory economic Ministers and urge them to declare their policy in relation to the Purchase Tax and other matters before the Budget because no one was buying in anticipation of reductions. That, at least, is a problem with which the present Chancellor does not have to cope.
I warned the Chancellor in January, when he announced a March Budget:
Does he think that he can wait two months? Does he not think that by doing nothing today he is inviting a spending spree which will make it all the more difficult for him to control as the Budget comes nearer?—[OFFICIAL REPORT, 17th January, 1968; Vol. 756, c. 1815–16.
That is exactly what has happened. We need not go through the evidence of the spending spree. We all know it in our constituencies and in every High Street in the country. The Chancellor, as he did at many points in his Budget yesterday, has done a great disservice to savings, because the spending spree has been financed largely out of people's savings. Therefore, the Budget has turned out to be much fiercer than it needed to be, because the slither went on until 3.30 yesterday.
That brings me to the Chancellor's Budget judgment. He has published his forecasts, and I am grateful for that. I have pressed him on the matter, as have hon. Members on both sides. It is an excellent procedure, though I underline the point which the right hon. Gentleman made, perfectly fairly—it is a safeguard for the future for both sides of the House—that if one does economic forecasting one must remember that it is a peculiarly inexact science and one should not necessarily read too much into any series of forecasts. All the same, they are useful, and I am grateful. They are somewhat skimpy, however, telling us everything except what we want to know.
I raise three questions in particular, and I should be grateful to have answers to the last two in the winding-up speech tonight, or at some appropriate time in the debate. The first question cannot be answered. I do not want an answer to it. Yet it is the key to the Budget: how much do we owe? I do not mean the total official debt outstanding, but how much of our resources, now including the dollar portfolio, is really ours, that is to say, is not mortgaged? What does it cost us to support sterling? What are the forward commitments? If we knew—I could guess, though I shall not—we should know why the Chancellor felt it necessary to take that appalling amount out of the economy, and we should be able to judge whether he has gone for what has been described as over-kill.
The answer depends very largely on what happens to unemployment. This is the graph which is watched most anxiously on both sides of the House of Commons. I am not concerned about the figures which, I think, come out tomorrow. The February-March month is usually the best month of the year, as winter begins to slip behind us. In 1963, for example, a special year because of the winter, there was a drop in those months of no less than 176,300. [HON. MEMBERS: "Who was the Minister of Labour then?"] Just a second. I was not Minister at that time, but never mind. In 1959—I was the Minister then—a time when the figures were much more comparable to the figures we have today, the drop was 58,000. If hon. Members want the figures, they were 609,000 down to 551,000.
The figure now—I shall not attempt to prophesy what is will be—could not, obviously, be anything remotely like the first, though it may well resemble the second. But the important question here—it was significant that the Chancellor made no forecast on this yesterday—is what will be the effect of his Budget measures, taken all together, upon unemployment.
In Table 13 in the Financial Statement, there is forecast for the period first half of 1968 to first half of 1969 an increase in the gross domestic product, at factor cost, of 2·7 per cent. The Government are claiming—I have no reason to dispute the claim—that productivity is higher than that, running at about 3 per cent. If that be so, on a crude comparison unemployment would normally rise. At least one would not expect it to fall. That is why it is right for us to ask—and I hope that this will be echoed from all sides of the House—that in the course of the Budget debate we may have from whoever may be most appropriate a clear forecast of unemployment, not for March but for the year ahead.
The third question which can and should be answered is that of prices. There is clear guidance in the newspapers today that as a result of the Budget the cost of living will rise by 2 per cent., and to this can be added 3 per cent. as a result of devaluation. I am afraid that I simply do not believe that it will be as low as that, and I ask two specific questions which I hope will be answered.
First, how much will the Budget proposals put up the Cost of Living Index in a full year, taking into account all the things that have not happened yet, like the increase in S.E.T., which takes some time to work through? Second, how much do the Government estimate retail prices will rise during the financial year 1968–69, including the effect of the Budget measures?
There is no question that the Budget yesterday, by far the heaviest in peacetime and perhaps even in wartime as well, was very much more than most people thought likely. If he is going for a brutal Budget, the Chancellor is entitled to hope—and this is in line with something I said at the beginning—that what he has done will satisfy banking opinion, if that is what he is trying to do. I read in today's newspapers a comment by Dr. Robert Strebel of Geneva, who said:
I am glad to say this is as tough as any of us expected, though I am sorry for the British people.
So, indeed, am I.
It has been said in the House, and it was said on television by the Chancellor last night, that the Budget is necessary in order to make devaluation work. It cannot be said too often that that is, at best, part of the truth. The real reason is that public expenditure has been, and still is, out of control. That is the main reason, and we warned the right hon. Gentleman's predecessor of this on many occasions. A year ago I wrote:
… the levels of public expenditure will pose a most serious problem for 1968–69 and the later years. This problem will remain so long as public spending plans are based on growth targets that are clearly now (under Socialism) out of reach.
Last year we discussed a Budget introduced by the present Home Secretary so finely balanced that he brought it down to £5 million and resisted all sorts of proposals—mostly from this side of the House, but sometimes from the other side—sometimes involving very small figures indeed, because it would upset the delicacy of that £5 million. Then we find that the Supplementary Estimates for last year were £562 million. One reason given in the Third Report from the Estimates Committee, in the reply to the first question, is:
A certain amount of it is probably due to the fact that estimates were drawn very tightly last year and this emerges from the very large


number of comparatively small items that have come in.
One would expect Estimates to be drawn fairly tightly, but that admission can surely only mean that Estimates were presented last year which it could not reasonably be expected would be fulfilled, and in this way in part the true level of expenditure was disguised from the House a year ago. So it is that the Government have taken 15s. from every £ of extra output since October, 1964, and so it was that yesterday, for the first time since 1951, a Budget was produced which planned a reduction in the standard of living of the people of this country.
I come to some of the Budget proposals—not to all of them, because then I should speak for as long as, or for much longer than, the Chancellor had to do. I begin with the question of family allowances, which is a matter of deep concern to me, and to which I devoted an enormous amount of attention in my first years in the House. I think that we can discuss this on the assumption that this is a problem, as I put it in a recent speech to the House, that both sides of the House want to meet. It is a particular problem which has emerged from the general level of advance in the social services. Family allowances were created in 1945. They have always been regarded as earned income paid for from general taxation. They are not, and never have been, thought of as an insurance benefit. Now there is a new principle, and a thoroughly bad one.
The Chancellor said, on 17th January, that he thought that the method he would propose, and which he did propose yesterday, was:
… selectivity in a civilised and acceptable form".—[OFFICIAL REPORT, 17th January, 1968; Vol. 756, c. 1800.]
First, it is not selectivity at all; it is a universal increase in benefits plus an increase in taxation. That is what the proposal amounts to, and it still leaves 250,000 children, half the number that we are trying to help, in poverty. When I am told that this is a civilised way of doing things. I have three questions to put to the Chancellor, who I am sure would have preferred another method if he could have found it.
First, is it civilised, as a result, to bring 300,000 people for the first time into paying Income Tax? That is the effect of

the Chancellor's proposal yesterday, and a further large number, calculated by us as 250,000, will be moved into the standard rate as a result. Second, is it really civilised, if we are trying to help the poor children in particular, that we should adopt a method that leaves half of the half million still in poverty? Finally, is it civilised that the new advance to be made in the autumn should be paid for by the sick, the injured and the unemployed?
It seemed to me astonishing yesterday that as the Chancellor said what he did not a mouse stirred on the other side of the House. He stated:
We propose to discontinue the payment for the first three days of sickness, injury or unemployment which is at present made after a period off work has lasted for a fortnight."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 266.]
He said that legislation would be needed for that, and a Bill would be introduced, when we should have an opportunity of discussing these matters more fully. The answer is that there is a better method. I shall not go into the details now, but it is possible to have a scheme of family benefits, which we have worked out in very considerable detail, which can automatically identify and meet need. The method the Chancellor has adopted is bad from every conceivable point of view.
I take, secondly, the question of the Selective Employment Tax. The only thing we can welcome here is that there is to be some help to the rural areas—I believe that the President of the Board of Trade will say something about that—which will be of help, which it needs very much, to the hotel and tourist industry. We regard S.E.T. as a ridiculous tax and are pledged to abolish it. Of course, we know perfectly well that at any given time, because of the forced loan aspect, the Chancellor would owe about £300 million to a great number of people throughout the country.
I do not wish to argue the merits of a value-added tax, although I believe them to be very considerable, and the Chancellor seemed to have some sympathy at least for that point of view. But the logic of the events I have just put seems clear. Not everyone would agree, but most would. If we are agreed that direct taxation is too high, if we are agreed that indirect taxation is both too concentrated and, particularly after yesterday, in many


aspects subject inevitably to the law of diminishing returns, it follows that one must look for a wider base of taxation upon consumption.
I know of the difficulties, as the right hon. Gentleman does, of collection at so many different points, but I think there is an answer, or at least a partial answer, by having a cut-off at a resonable level. There are many points of detail. But if this analysis is generally commendable to the House—[HON. MEMBERS: "No."]—I said, generally. I do not pretend to carry the whole House with me. If this analysis is acceptable to large numbers of hon. Members, it seems to me that the advantages of a move in this direction are very great, although the right hon. Gentleman cannot do it at the moment.
I would like to say a word, really to record the bare facts, about the increases in taxation upon transport. The first post-war Labour Government put the petrol duty up by 1s. 1½d.; from 1964 until now, it has gone up by 1s. 4d.—a total of 2s. 5½d. in nine years, whereas in the 13 years of Tory rule it went up by 10½d. Since October 1964, licences have gone up by £10; in our 13 years they went up by £2 10s. The licences for commercial vehicles have been increased by 125 per cent. in cost since Labour came to power. For a 7-ton lorry in 1964, the duty was £126. Now it is £283 10s.
We are delighted to learn that a large section, consisting of about 25 or 27 Clauses, of the Transport Bill is to be dropped—the same Clauses on which the Minister of Transport kept us up all night last week arguing as being essential to her integrated transport policy. The cost of these Clauses would have been about £30 million to £40 million. That burden was considered by most of British industry as a grave folly, but now the additional licence tax and the fuel tax will cost the movement of freight in this country about £60 million—about twice as much as something which was regarded as dangerous by industry.
I turn now to the question of the prices and incomes policy. We leave the main engagement until tomorrow, but, because they express what I believe to be the right attitude to the problem, I would like to read two brief extracts from speeches I have made outside the House. The first extract is from the first speech

I made dealing with this problem at the Blackpool conference in 1966: I said then:
… in my view, an incomes policy can have a useful, though secondary, effect once the Chancellor of the Exchequer has got the level of demand right in the country. You will find, in fact, that all Governments operate a sort of incomes policy … My view, then, is clear: there is a useful but a minor, or anyway a marginal, part to be played in this field.
On the attitude of the Government, which I believe to be crucial, I said when speaking to the Leeds Chamber of Commerce in January:
The answer is not to be found in detailed statutory control of prices, wages, salaries, dividends and all forms of income. The Government should give a lead. They should be seen to be absolutely firm in their own wage negotiations. They are the biggest employers of all, and a stand by them in the nationalised industries against increases unmatched by productivity and against increases which the country cannot afford would do more good than any amount of exhortation.
I believe that to be the right attitude for the Government to take.
There are two or three arguments as to why we must have a Statutory control of wages. This is the heart of the matter. The rest is largely window-dressing, as we know. We all know that, in the period of Part IV, as it was, there were 14 Orders before the House on wages, one on charges—laundries—and none at all on prices. That is why I say that, outside the control of wages, this policy is largely a matter of window-dressing.
The first claim that is made is that the increases in wage rates in this country, not just in any one given year but over the years, has been grossly out of line with our competitors, and this is not true. I have before me, from a book called "Incomes in Post-war Europe", published by the United Nations, lists giving the wage increases per cent. per annum for 13 countries, including ours and our main competitors, and the years are from 1952 to 1965, which are good growth years for this country. We come tenth in the list. Only three countries of those surveyed have smallerwage increases than we do. It is quite untrue that we are grossly out of line on wage increases.
The second argument is that, in some way, the policy works. What evidence there is is against this claim. Since 1st July, 1966, weekly rates have gone up by


8 per cent. and monthly rates by 8·45 per cent. In both cases these are greater increases than took place between the same months of 1961 and 1963, when the respective figures were 5·7 and 6·5 per cent. In other words, we did better without legislation than the Government have been able to do with it.
The last point is that in some curious, undefined way the policy is fair. The answer is that we know that it is not. No one knows it better than we do, who have sat through so many prayers and debates on prices and incomes. Salaries largely escaped, and these provisions are, in fact if not in intention, anti-trade union. Of course one realises that many employers want this policy. Many of them would like a cosy, protectionist cocoon in which profits will go up, as they will this year, and the Government will take upon themselves the responsibility of holding wages down.
I do not regard it as any business of this House to create such an enervating climate in the country. Nor is it the business of this House, particularly of the Tory Party, to encourage the Government to take decisions that belong essentially to employers. Incomes policy, at any rate a statutory one, is no substitute for demand management, for the ruthless pruning of Government expenditure and for the development of a true savings policy. It was in these last two matters that we found the Budget so inadequate.
After all, we were told in November 1964 that the measures proposed then were the alternative to stop-go, and we ended up with both. Then we were told that the standby credits and loans were the alternative to heavy unemployment, and we ended up with both. We were told that deflation was the alternative to devaluation, and we ended up with both. Last night, the Chancellor asked the people to be patient a little longer and endure hardship for a time. I remember his predecessor saying much the same thing in 1967, in 1966 and in 1965.
There can be no doubt that the Budget on balance is destructive. As to savings the only idea that the Chancellor has put forward was for a lottery and a development of the Premium Bond, the same Premium Bond which was described as "a squalid raffle" by the present Prime

Minister when it was introduced by this side of the House. The Chancellor says that he is against compulsory savings, and I understand that argument. I presume that, like all Chancellors, he is in favour of all forms of voluntary savings.
I wish that he would look again at the method that I have put forward, along with others, for developing what I call a S.A.Y.E. scheme—" Save As You Earn." The problem is to attract genuine new saving. There is no particular advantage in getting the big savers to switch in order that they may get another one-quarter per cent. or one-half per cent. in interest. That is not the problem that the House as a whole would like to meet. That is why, if I may again quote from a recent article of mine in the Financial Times, I said:
Inertia is an important part of human behaviour.
I believe this to be the key to savings. If one can once get a single conscious decision to save, if that money does not reach the pay packet and is collected as a prior charge on income through the P.A.Y.E. machinery, what I am calling the S.A.Y.E. machinery, there would be an enormous benefit upon the level of savings and upon genuine new savings.
As to public expenditure, we on this side of the House feel that on grounds of balance of payments, food production, savings on capital expenditure, that it would be right to go for a system of agricultural levies. We believe that it would be right to give targets for reductions to all Ministries, and to abolish some Ministries, including in particular the Department of Economic Affairs. Even now we think that the Chancellor, if he is as concerned as he has rightly shown himself to be about confidence, ought to reverse some policies, particularly the Transport Bill, which he knows very well is disastrous.
It is now well over three years since the Prime Minister in the third or fourth week of November 1964, not at General Election time or just after, came to this House and said that "in the last week factors had emerged" which were weakening sterling. Since then we have never for long been strangers to crisis, and every debate, as is this one, is dominated by the anxious search for restoration of confidence. Sometimes hon. Members opposite think that they have


found the touchstone. There were wild cheers which greeted the announcement of devaluation; they did not last for long. There were wild cheers which greeted the Chancellor's speech yesterday; the euphoria has already gone.
I am aware that I used in July, 1966, words about the Prime Minister that I have never used, nor would desire to use, in respect of any other Member of this House. I said that we will never trust him again. I need not add to the phrase. There can be no sustained recovery of confidence while the Prime Minister clings to office. Every day he sits there delays by a day the recovery of our country. For the rest of them, every promise has been broken, every pledge has been abandoned. They are, and they know it, utterly discredited. It is not just the Tory Party but the whole country that has neither confidence nor trust in them.

4.25 p.m.

The President of the Board of Trade (Mr. Anthony Crosland): The right hon. Member for Enfield, West (Mr. Iain Macleod) has made, for this occasion, a very thin speech, and it was not made more confident by his making no fewer than four quotations from past speeches and articles of his own. He made a number of interesting points, to some of which I shall attempt to give an answer in the course of my speech. One thing that he utterly failed to do was to give any indication of what his alternative strategy would have been.
He apparently did not challenge the broad arithmetic of my right hon. Friend's Budget. In other words, he conceded that any Chancellor in this situation would have to take large sums of money out of the country's purchasing power. When he came to the question of how this might be done, his solutions were extremely empty indeed. He is apparently against any increase in direct taxation. In one of the articles from which he quoted, his Financial Times article of 13th March, he went further and said that he wanted to reduce direct taxation.
He is against the Selective Employment Tax. He is against, so the Leader of the Opposition said yesterday, any indirect taxes which might possibly increase the costs of industry. He is against

a statutory prices and incomes policy—his policy would be weaker than the Government's and throw an even greater burden on the Budget. If one goes through all the measures that he has suggested, it is perfectly clear that he would, were he to be Chancellor, have a very large gap indeed, which in practice he would satisfy in one way alone, by savage cuts in public expenditure.
None of the cuts that he mentioned would come anywhere near the total that he would have to take out of spending power, particularly as the party opposite is not only not willing to cut defence, but actually wants an increase in defence expenditure. It wants more money east of Suez, more money in Aden, more money for the Gulf and more money for military aircraft. The only implication that one can draw is that the policy of the party opposite in this situation would be savage cuts in the Government's social programme. This represents the fundamental difference between the strategies of the two parties in this situation.
I want to begin as the right hon. Gentleman did, by placing the debate in the international context, in the context not only of devaluation but also of the decisions taken in Washington last weekend, which may well mark the beginning of a new era in international co-operation.
For a long period after the war, it was clear that we could not rely on gold to supply the increased liquidity needed to keep pace with the growth of world trade. The gap was made good by the increasing rôle of the so-called "key currencies", particularly the dollar. American deficits provided the increase of liquidity on which the rest of the world relied. Ours was a smaller part but sterling balances were, and still are, an essential part of the reserves of many countries.
There was always a paradox at the heart of this system, because when the United States and Britain moved into deficit and remained in deficit, there was a continued weakening in the desire to hold dollars and sterling as a monetary reserve. This created a problem for world liquidity which had been foreseen and discussed for very many years, long before our devaluation.
Various schemes were proposed over the years and the right hon. Gentleman


referred to those put forward by his right hon. Friend the Member for Barnet (Mr. Maudling). Various expedients have been introduced and, more recently, largely on the initiative of my right hon. Friend the Home Secretary, progress has been made in the I.M.F. towards a more durable supplement to world liquid resources in the form of the special drawing rights.
The events of the last few days, particularly the decisions reached last weekend in Washington, may come to represent a further important step in this direction. The Central Banks represented in Washington have divorced the rôle of gold as a monetary reserve from any pressures which result from the production and consumption of gold as a commodity, and from the variations in the rates of private hoarding. It is, of course, too early to say how this scheme will work. But one thing it seems certain to accomplish—if indeed it has not accomplished it already—is to relegate speculation in gold to a matter of secondary importance.
The real issues now are threefold. First, the reserve currency countries—Britain and the United States—themselves must accept the burdens of adjustment in their own balance of payments. Second, the creditor countries must respond by appropriate policies of domestic growth and international lending to enable that adjustment to take place against a background of expanding, and not contracting, world trade. Third, all countries must be helped to play their respective parts by a rational and disciplined international monetary system. The Washington decisions make it possible now to hope for progress on these lines.
I placed first the requirement that reserve currency countries put in order their own balance of payments. I turn therefore to our own balance of payments problem. Contrary to what the Leader of the Opposition said more than once, this is not a problem which originated with the present Government. It reflects a long-term deterioration in Britain's trading and payments position. In the last ten years, we have had on recorded transactions three years of balance of payments surplus and seven years of balance of payments deficits.
Over the average of years of reasonably high activity we have spent abroad, in excess of what we earned abroad, an amount that represented about 1 per cent. a year of our national product. Put in these terms, it may not seem a large amount. But already in this decade since 1960 it adds up to a cumulative deficit of over £2,000 million on current and capital account. Such deficits have to be financed out of reserves, or by disinvestment, or by adding to our debts; and we have to recognise that this process has contributed to the world monetary problem.
As a method of restoring the situation, devaluation, by contrast with either of the alternatives of import restrictions or more deflation, creates a more fundamental and far-reaching improvement in our competitive position. It is in this respect a much more powerful weapon than the policies either of 1961–62 or of July 1966. Certainly it involves a short unpleasant period, as my right hon. Friend made clear yesterday, when the standard of living may actually fall. But it offers, if we use it right, a much firmer prospect of finally getting out of our balance of payments difficulties which have dogged our economy for so many years past.
I said "if we use it right"—that is, if we adopt now the right economic strategy. My right hon. Friend the Chancellor, in his massive Budget speech yesterday afternoon, dealt with the demand side of our strategy—with the need to restrain and how to restrain domestic demand so as to free resources for exports, import saving and higher capital investment. Success in that aim is the precondition of everything else. But my Department is concerned, as are others, with the supply side of our problem—with the total of our resources and with their proper allocation between competing ends. This is equally vital both for our long-run growth and to ensure that we take advantage of devaluation. I want to set out the Government's strategy on the supply side.
I start with the visible trading account. I have said many times before that this is likely to get worse before it gets better. The short run effect of devaluation, as I think hon. Members realise, is adverse for reasons which were clearly explained in a recent speech by the Managing


Director of the International Monetary Fund. He said:
Import prices in sterling terms will have increased almost immediately, whereas the volume of both imports and exports is likely to respond gradually. It cannot be expected, therefore, that the trade balance will improve sharply all at once. But devaluation is a powerful tool. The decision to use it was absolutely right.
The last comment is interesting in view of the attitude of the Leader of the Opposition.
This prediction is borne out by the recent trade figures. I estimate that import prices have already risen by about 9 per cent., between October and February, mostly as a result of devaluation; and import volume has also increased with the recovery in our own production. Export prices, on the other hand, have risen by only about 4 per cent.—less than half—in the same period. It is true that export volume is running at a very high level, but this is still partly the backlog effect of the dock strike, and as this effect wears off there may well be a temporary fall in exports before devaluation begins to work through fully. Therefore, as I say, the trade figures may well get worse before they get better.

Sir Cyril Osborne: How long will it be before they start to get better?

Mr. Crosland: Anybody who makes a precise prediction about the precise month would be very reckless indeed. What I have said again and again is that in the second half of this year—I was about to say this—I think that we shall begin to move into surplus. But I must again add the warning, which the Leader of the Opposition would support as a past President of the Board of Trade, that figures for individual months, even when they are seasonally adjusted, can vary by some tens of millions of £s due to purely random influences.
My statisticians tell me that a monthly figure can easily differ from the underlying trend, even in normal times, by £15 to £20 million a month; and deviations of up to £30 to £40 million are perfectly possible. Therefore, we should focus attention on the underlying trend, assessed over several months. This underlying trend now looks distinctly hopeful. World trade in manufactures, which last year rose by only 7 per cent. compared with

12 per cent. the year before, looks set for a faster expansion this year. Perhaps the best indicator is the new confidence which industry is feeling about the future.
Before and even immediately after devaluation there was very little optimism about prospects. The C.B.I. Industrial Trends Survey last October showed that only about one-third of exporters expected an upward trend in either new export orders or export deliveries. But last month's survey showed that optimism about export prospects was far higher than in any previous survey. Nearly two-thirds of exporters are more optimistic than they were in October, and three-fifths expect a rise in export orders and deliveries over the next few months. This is partly the answer to the hon. Member for Louth (Sir C. Osborne).
The January inquiry of the National Institute shows the same upsurge in confidence since November. Engineering firms expect an increase of about 20 per cent. in their exports, the vehicle industry a rise of about 35 per cent. and chemical firms a rise of 13 per cent. Therefore, despite what the right hon. Gentleman said, there is plenty of confidence in industry about the export prospect.

Sir Keith Joseph: Would the right hon. Gentleman say when he is using proportions whether they are in terms of value or volume? Previously he has been referring to value. The last figures may have been in terms of volume.

Mr. Crosland: The figures which I have given are perfectly clear. The only figures I have quoted were the last ones about which I was asked by the right hon. Gentleman. Previously I was talking about the proportions of exporters who were either more or less optimistic than they were before.
There is, therefore, plenty of confidence in industry about the export prospect. There is also other evidence. Applications to the E.G.C.D. for credit limits are at a record level—8 per cent. higher than a year ago, in value, and on a rising trend. Although there is an inevitable timelag between new orders and actual deliveries, the trade figures should soon begin to show some reflection of the higher export order books. For example, I can tell the House that the


February figures for car production, earmarked for export, seasonally adjusted, show a 40 per cent. increase in volume on the previous three months. I may add, in view of one or two rather hysterical reactions of motor manufacturers to the Budget reported in today's newspapers, that, not only is that the case on the export outlook, but new registrations of cars for the home market in the last three months have also been easily at a record level.

Sir Gerald Nabarro: rose—

Mr. Crosland: I have given way three times. Furthermore, motor shares on the Stock Exchange today have shown a very considerable increase.

The Secretary of State for the Home Department (Mr. James Callaghan): In value.

Mr. Crosland: In value.
It is for all these reasons that I expect, barring some totally unforeseen development, that by the end of the year our visible trade balance, in value, will be moving towards a surplus.
Helping exporters is one of our most important tasks in the Board of Trade, and since devaluation we have greatly expanded our efforts. We are continuously improving Board of Trade services connected with British Weeks, with export intelligence, with promotions and exhibitions generally. We have strengthened the very important support which we receive from the British National Export Council by expanding and simplifying the financial aid which we give it and the series of Action 68 Conferences held earlier this year to publicise the opportunities offered to exporters were a notable success. The E.C.G.D. also has introduced new arrangements to help our smaller exporters.
We are trying now to devise new ways of stimulating and supporting exporters nearer to the point of actual sale. Examples of this are the formation last year of the Overseas Marketing Corporation with financial support from the Government; the aid which the Government are giving to the export marketing partnerships scheme organised by the Institute of Marketing; the formation inside the Board of Trade of the Overseas Pro

ject Group following the recommendation of the Cromer Report published recently; inquiry into the possibility of a Government sponsored group representative scheme to allow companies which make complementary goods for the same type of market to share the cost of employing marketing staff overseas; and help to the British export houses to stimulate more research overseas. These various export services are being more and more used by British businessmen. I would judge from the fact of the many favourable comments which we receive both from exporters and also from hon. Members on both sides of the House who travel abroad that we are increasingly providing the export services which industry wants.
I turn now to the invisible account. I hope the House welcomed the announcement which I made last week—

Sir G. Nabarro: Before the right hon. Gentleman leaves exports—I am grateful to him for giving way—

Mr. Crosland: I was giving way to the hon. Member for Liverpool, Waver-tree (Mr. Tilney).

Mr. John Tilney: Would the President of the Board of Trade say something about the export rebate?

Sir G. Nabarro: Hear, hear.

Mr. Crosland: The reasons the export rebate was given up were explained very fully in the debate immediately after devaluation. I think the hon. Gentleman will have noticed that we have now taken powers in the light of possible American action not to abolish the rebate if that should seem the appropriate thing to do.
I was turning to invisibles. I hope the House welcomed the announcement I made last week of the establishment by the Bank of England and the B.N.E.C. of a new permanent Committee on Invisible Exports, because the fact is that these wide-ranging activities too often go unnoticed, pushed into the background by headlines given every month to the figures of visible trade. Yet our gross receipts from invisibles last year reached—in value—over £3,000 million, equal to about 60 per cent.—in value—of our visible exports, and they produced a net favourable balance of some £130 million.


Following devaluation I would expect a substantial improvement in the account on invisibles. I hope to see useful increases in the net earnings of the shipping industry, the civil aviation industry, and the wide range of services, many provided by the City, of which we sell abroad far more than we buy. There should also be a substantial gain in our net earnings on interest, profits and dividends; 80 per cent. of our overseas receipts for this item arise in countries which have not devalued, whereas a much smaller proportion of our payments are in terms of foreign currency.
I want to say in particular a word about tourism, where the Government propose a substantial measure of further aid. This is a very rapidly expanding sector of world trade, and we must secure our share in it. Last year overseas visitors to this country numbered over 4 million and they are estimated to have spent some £240 million in Britain. By 1970 we hope to have some 6 million overseas visitors and we must be able to provide adequate accommodation for them as well as for our own holidaymakers.
We, therefore, propose to replace the experimental hotel loans scheme by a much more ambitious scheme for assisting new capital investment in hotels. It will consist of hotel development grants and loans—for new hotels, for bedroom extensions to existing hotels, and for certain items of fixed plant and equipment. The development grants for new hotels and major extensions and the improvement grants for certain fixed plant and equipment will both be at the rate of 20 per cent. subject to certain conditions, except in the development areas, where the rate of grant will be 25 per cent. Loan assistance will be broadly on the lines of the existing scheme, though it will be less restricted in scope, and, of course, will take account of any grant payable. Grant and loan assistance will be available only for hotels with 10 letting bedrooms or more, except in the Greater London Council area where the minimum will be 25 rooms.
I shall also seek powers to require the registration of hotels so as to make available more information on hotel accommodation for the benefit of the travelling public at home and overseas. This is where we are lacking compared with

almost all other countries. It is very nice—my right hon. Friend the Chancellor has a family interest in this—to have the Good Food Guide and the R.A.C. and A.A. guides and surveys, but we want very much more information, for we have not anything like the reliable systematic information about our hotels which almost every other country which seeks to attract tourists has about its hotels.

Sir Harmar Nicholls: The right hon. Gentleman will be very popular in encouraging new hotels, but is he aware that the impact of S.E.T. may push out of existence existing hotels? They are being made into nursing homes, and they are being let as flatlets. Will not the new hotels only make up for the ones being lost?

Mr. Crosland: That is certainly not the case, and it is perfectly clear it is not the case if one reads the results of hotel companies recently reporting.
I do not wish to burden the House with unnecessary detail this afternoon and I am, therefore, arranging for the details to be made available in the Vote Office later this afternoon. I shall in due course seek Parliamentary approval for grants and loans to be paid for hotel projects on which work begins on site after 31st March this year and before 31st March, 1971.
I shall have something more to say about hotels in development areas in a moment, but this is a statement about national policy for hotels, and made in the context of national policy for tourism, and I hope it will encourage the hotel industry to accelerate its investment plans and will give a well-merited boost to an industry equally important from the point of view of export earning and import saving.
I turn from the balance of payments to the domestic economy and to the crucial need to increase our efficiency and our productivity. This is a subject which lends itself, however, to platitudes and exhortation—a temptation which Ministers of various Governments have not always succeeded in resisting but which I shall attempt to resist this afternoon.
It is also a subject which is now more important than for many years past—for this reason. For years past what has held back our growth in this country has been


the fact that every time we had a boom we ran into a balance of payments deficit; so we had to knock the boom on the head and go back into a period of recession. Hence, fundamentally, our slow average growth rate over the last 15 years. The purpose of devaluation is to remove this balance of payments constraint on our economic growth, and from now on our rate of growth will depend solely on the growth of our productive potential in Britain. So questions of productivity, of efficiency, of productive investment become even more central than they were before.
I think it is possible, and so do many people in industry, that we may be on the verge of a break-through here to a new level of achievement. This is because a number of underlying changes in this country are all tending in the same direction.
First, capital investment seems to be rising as a proportion of the national income. The downturn last year was much less marked than in the cyclical downturn after 1961, and the latest information from industry suggests that it should rise again this year and into 1969. So, despite what may be said in this House about confidence, there seems to be a clear indication of basic industrial confidence about the future.
Secondly, and equally significant, is the growing tendency towards the rationalisation of British industry. This is taking place partly spontaneously, partly under the influence of the I.R.C., and partly under the direct influence of Government. I do not want to give the impression that I think or anyone else thinks that all mergers are automatically beneficial or that rationalisation is a panacea—of course it is not. Yet it is true that the size of firms in many British industries has been small by international standards, and the structure of many of our industries highly traditional.
Certainly we can now see a remarkable process of change. The mergers between G.E.C. and A.E.I., British Motors and Leyland, and the suggested merger in the computer industry, will all create powerful industrial and marketing organisations which will make themselves felt in the world in any company. Rapid rationalisation is going ahead in steel and shipbuilding. The cotton and wool

industries are both undertaking fundamental studies about their future structure. Even the banks and the insurance industry are feeling the wind of change. There are few major British industries whose structure in three years' time will bear much resemblance to what it was three years' ago.
All this raises social problems, as we know from recent events. It also raises problems, about which I shall hope to say more on another occasion, about the relationship of our policies on monopolies and mergers; though for the sake of those who persist in over-simplifying these matters, I say in passing that I see no inconsistency in showing concern about the possible detriment to the public interest of monopoly power, while at the same time working actively for stronger industrial units, because they are both means to the common end of industrial efficiency.
This rationalisation that I have described is only one aspect of the enormous redistribution of the labour force which is now in progress. The House probably realises, but the country as a whole may not, that in the last five years over 600,000 workers have left the traditional industries of coal, railways, shipbuilding, textiles and clothing, and agriculture; and although all these industries, as they reorganise and modernise, have a competitive future in front of them, the process is clearly not yet at an end.
This redistribution of our labour force raises acute human and economic problems, to some of which I shall turn in a moment when I discuss regional policy. Yet it is very hard to doubt that this accelerated movement from traditional to newer industries and services, together with the process of rationalisation which I have just mentioned, will lead to a fundamental restructuring of our economy which must improve its basic competitiveness in the modern world.
Clearly these structural changes are not enough by themselves. There is no essential magic about a merger as such or even capital investment as such, any more than there is about devaluation as such. We have to exploit them. We have to use them to give a more competitive edge to our efficiency—and "we" means everybody, in all levels of Government and industry. I think that there are hopeful signs here also. In management, more


and more people accept the need to become more professional and are doing something about it. Management consultants are in growing demand and management education is beginning, literally, to pay dividends. Technical education at all levels is expanding extremely fast, and we are starting to get real results from the Industrial Training Act.
Again the importance of marketing is becoming much more widely appreciated. In the past, we have perhaps had it a little too easy in the way of ready-made markets. Now we have to spend more time and money on market research and marketing policy, and we have to train professionals to tackle them. I hope that what I have already said about our Board of Trade export promotion services shows that we also are conscious of this need. Last year, there was an encouraging increase of productivity in many industries. I believe that it may reflect the cumulative influence of these various factors which I have mentioned.
I now turn briefly to the third aspect of the Government's economic strategy—regional and development area policy. I can be brief, because the subject was discussed in the House only last Monday. The policy has both a social and an economic purpose. The social purpose is to avoid the unemployment and stagnation, leading to hardship and, if it goes on long enough, to despair, which must otherwise follow the run-down of traditional industries in our older industrial areas. The economic purpose is, by achieving a more even and therefore a higher level of employment, to exploit our productive potential to the full.
In the Budget debate last year, the right hon. Member for Enfield, West was gloomy about the prospect. He said:
Nor can I see the slightest real evidence that the development areas have been faring, or will fare, better this time".—[OFFICIAL REPORT, 12th April, 1967; Vol. 744, c. 1215.]
Certainly a year when the level of activity and investment had to be restrained was not an ideal background for development area policy.
Yet in fact the policy is working. The financial inducements to move to development areas are now extremely strong—some people think too strong. The development areas are getting an increasing share of industrial development

certificates; in 1967, with only one-fifth of the insured employees in the country, they received over one-third of i.d.c. approvals. As a result of these efforts, there are at long last encouraging signs that the contrasts in unemployment rates between regions—which have been so persistent for so long—are beginning to narrow, especially in the case of Scotland and Wales.
There are, however, certain rural parts of development areas which face special problems because the proportion of employees engaged in manufacturing industry is exceptionally low. As my right hon. Friend indicated in his Budget statement yesterday, we should like to help these rural areas, where there is often a strong case for attracting more visitors and tourists, and we propose to do so by wholly relieving hotels situated in those areas from the S.E.T. The definition of the localities and of hotels which will qualify for relief will be set out in the Finance Bill. Broadly speaking, we intend to include hotels, inns, boarding houses and other similar establishments, provided that they have not less than 4 bedrooms available for guests. Refunds will be made by the Ministry of Labour to the employers concerned in respect of their payments of tax made on or after 2nd September next. The concession is expected to cost about £1 million in a full year.

Mr. Ian MacArthur: rose—

Mr. Crosland: I have said that details will be given in the Finance Bill. I will not go into further details now.

Mr. MacArthur: On this point—

Mr. Crosland: On this point I have said that details will be given in the Finance Bill. There will be plenty of time to discuss it then.

Mr. John Hall: The right hon. Gentleman means relief on the entire S.E.T.

Mr. Crosland: Yes, not simply on the increase on the S.E.T. contributions.

Mr. MacArthur: Will the right hon. Gentleman give way?

Mr. Crosland: No, I have given way a great deal. There will be plenty of


opportunity to discuss the matter when we come to the Finance Bill.
A steady reduction in regional disparities in unemployment means a considerable increase in our productive potential. It brings into employment hitherto unemployed people in the development areas, and so in the economy as a whole. In fact, it brings into employment many more people than are indicated by the fall in the unemployment figure alone, since much of the extra employment consists of people who did not register. Over the next few years we can hope that, as a result of our regional policies total national employment might be higher by about 100,000 to 150,000 than would otherwise be the case. This is equivalent to an extra national product of the order of £150 million every year, year after year. This is a goal well worth aiming at.
Of course, we are not there yet. That is why I cannot listen to the siren voices, even though they come from Coventry or Greenwich or Woolwich, which urge us dangerously to relax our i.d.c. policy in the Midlands and the South. That i why I cannot accept the suggestions that our development area policies are too crude or too extravagant.

Mr. John Cronin: Will my right hon. Friend bear in mind that as a result of pit closures areas which are not development areas are in danger of considerable unemployment? Can he reassure the House that he will adopt a favourable attitude concerning i.d.c.s in areas where pits are closed?

Mr. Crosland: We have given that assurance a great many times in the past. I was about to come to that particular point, as so frequently happens when one gives way to interruptions.

Mr. MacArthur: Will the right hon. Gentleman give way?

Mr. Crosland: No. I have given way enough.
I have said that is why I cannot accept the suggestions, as of now, that our development area policies are too crude or too extravagant. This is why we have made the special hotel concession which I have announced this afternoon.

Mr. MacArthur: rose—

Mr. Crosland: No, I will not give way.
This is why we set up the special development areas. The fact is that the historical problem of the development areas is too deep-seated, and their current unemployment still too high, to allow us to relax our concentration.
But while maintaining our broad policies so long as they are needed—and here I come to the point raised by my hon. Friend the Member for Loughborough—we must, of course, consider whether there are modifications which we can and should make, and especially whether there is any way of meeting the legitimate needs of those parts of the country outside the development areas where there are obvious economic problems. There must be an arbitrary element in any demarcation of boundaries between regions that are to qualify for special assistance and those that are not. These are the problems which were discussed in the debate in this House last Monday, and which led the Government to set up the Hunt Committee. When that Committee reports in the autumn, the Government and the House will have to consider what further refinements in policy may be necessary and practicable.

Mr. MacArthur: rose—

Mr. Crosland: I will not give way.
Mr. Speaker, as the Chancellor made clear yesterday, the Government have one over-riding economic aim—to make devaluation work. But we must pursue this economic aim in the context of the social priorities of a Labour Government. That is why the Budget yesterday, to the anger of hon. Members opposite, was so carefully designed to distribute the burden equitably. That is why, as a recent C.S.O. study has shown, the effect of our policy over the last 3 years has been to redistribute income to the poorest sections of the population. That is why we must be as concerned with regional disparities in unemployment as we are with disparities in spending power. And that is why, above all, we must resist the remedy of the party opposite, which is to make still further cuts in public expenditure—cuts which, since they want actually to increase defence expenditure, would fall savagely on the social programmes.
It is in this context that we present our policies. These policies ask for a period of sacrifice—for a fall in consumption of 1 per cent. after a 5 year period during which consumption in real terms has risen by 15 per cent., and for a temporary fall in real wages after years in which real wages have risen by amounts which the country clearly could not afford. This is not so terrible a sacrifice for a nation as rich as ours—to accept a pause and even a temporary set-back.
But even if the sacrifice were worse, it would still be worthwhile. If we can only accept this period of restraint, the prize of steady growth could be within our grasp in a surprisingly short time. We could rid ourselves of our chronic balance of payments problems, and free ourselves of interference by foreign creditors. This goal is worth the amount of restraint for which the Government ask.

5.3 p.m.

Mr. Jeremy Thorpe: When one considers the gravity of the economic situation, the harshness of yesterday's Budget, and then listens to the President of the Board of Trade, he might well be the chairman of a successful company giving a report to the shareholders of a brilliantly successful year's trading with the promise of even wiser stewardship and success in the year to come.
When I was privileged to be an undergraduate, the right hon. Gentleman was an economics don in my college. I fortunately read law. I confess I am somewhat relieved to have escaped the academic purity of his teachings, because I think that he would now be classified, after his speech, as one of those intellectuals of whom the Home Secretary so strongly disapproves.
The right hon. Gentleman gave us an interesting surmise about sterling. Not having been one of his economic pupils, I can, therefore, transgress the limits of academic purity. Surely the problem concerning sterling is that for too long it has been over-valued and for too long it has had to bear international burdens well outside the capabilities of this country. That has been the position, and it has only now been recognised by the Government.
In 1958, the present Leader of the House, writing in the Daily Mirror, on 30th December, said:
The fact is that Britain is now no longer strong enough, or big enough, to maintain the £ sterling as an international currency in absolutely free competition with the American dollar.
How right he was in 1958. How regretful it is that it took the run on the £, eventual devaluation, and, indeed, the gold crisis, for this Government to have that brought home to them.
It would be churlish of me at the outset not to congratulate the Chancellor of the Exchequer on the skilful and lucid manner in which he presented one of the harshest Budgets that this country has sustained in peacetime. The House will be grateful to him for the utterly realistic way in which he gave us an account of the state of the economy. But it should be clear that this is not the Budget of a successful Administration. It is the inevitable result of a continued deterioration in the economy of this country, a process dating back many years, which the past four years have done nothing to arrest. I must say that the euphoric reception of this Budget by the majority of right hon. and hon. Gentlemen opposite was one of the most interesting exercises in group masochism I have ever witnessed. The effect of this realism is that we heard from the Chancellor a devastating indictment not only of the past 15 years, but of this Government's record in particular and that of his own predecessor specifically. There were times when I felt that I was listening to a new Chancellor in an incoming Administration laying bare the faults of an outgoing Administration that had only just been defeated at the polls.
I was reminded of the Chancellor's own words when he said:
It is also clear that the Chancellor of the Exchequer is very anxious, in his statements, to dissociate himself from his predecessor."—[OFFICIAL REPORT, 18th April, 1956; Vol. 551, c. 1128.]
We would say at least for that relief, much thanks.
The British people have been presented with a Budget which will levy sums of an unparalleled amount, will add anything between 1s., 2s. and 3s. in the £ to the cost of living, and will impose


a wage restraint which no Tory Government would have dared to introduce without facing the risk of a general strike. Indeed, it is the third dreary instalment of the last few months of devaluation, public cuts, and now private misery.
I shall say a word about public cuts later, because we alone have divided the House on those cuts. We do not find ourselves in agreement with the Government as much as do the official Opposition. Nor are we advocating that we should step up our expenditure east of Suez. Had we been listened to, reductions would have been made many years before.
The Chancellor was the first to admit that in this Budget there were no new techniques, no new fiscal measures, and that he had to rely on the blunt instruments of his predecessors. He was like a surgeon making a vital incision into a patient, with old-fashioned instruments, and almost without the benefit of anaesthetics. I would make three criticisms of the Budget.
First, there is no suggestion that he is prepared to introduce, or even to prepare for the introduction in the future of, new or refined systems of taxation. He made the usual obeisances to the value-added tax and others, but said that the moment was not right, and that there was not sufficient time. These excuses are made every year, but perhaps this year he had more justification for saying that than many other Chancellors. He inherited an appalling economic situation, left by his predecessor whose very failure was accepted and underlined by the fact of his resignation. But there was no indication, even for the future, of an examination of the possibility of having a gift tax, of a thorough study of a value-added tax, or possibly a pay roll tax, taxation of land values, co-ownership in industry to spread wealth, and so on. None of these matters was touched on.
I had hoped that the Chancellor would say that on the assumption that he would be Chancellor next year he was starting a thorough-going reform of our whole taxation system. The value-added tax could be one of the most important to be introduced, and I should like to be sure that the Neddy, which at the moment is investigating this, will be told that the Chancellor would like to be working on this in the coming months. In fact, I give

him a slogan. If we could work towards the value-added tax, which would be an enormous incentive for cutting down overheads and boost exports, he could refer to the next Budget as Vat '69.
One thing that is self-evident is that we cannot live from Budget to Budget. We need something like a Standing Committee on Taxation to which experts from industry, commerce, and the trade unions could be summoned to give evidence and to express their views, not to fashion the Budget, but to see whether we can cease to go into a Budget on an ad hoc basis with legislation which is so incredibly complicated that the accountants are assured of fat pickings in perpetuity. There are many hon. and right hon. Members on both sides of the House, from among whom I carefully exclude myself, who have great knowledge of taxation, and I think that it would be of enormous advantage to any Government if the benefit of their advice and their judgment was given during the coming year.
The second thing is that the Budget gets us no closer to the European community. In fact, it does the reverse.

Mr. Eric S. Heffer: It does get us closer.

Mr. Thorpe: The hon. Gentleman says that it does. I admire his independence and his persistence, but I am sure he will agree that even his powers of eloquence and persuasion have not always had the desired effect and result. I think that we would both marvel at our moderation in that regard. As I was saying, the Budget gets us no closer to the idea of the European Community and standardisation of taxes along the lines of our European partners. In fact, it does the reverse.
The third thing is the absence of incentives, both in the encouragement of savings, and in the encouragement of productivity. I say straight away that I think it was inevitable for the Chancellor to raise a large sum of money. I accept that. That was the inevitable consequence of the economic situation into which the Government and their predecessors have landed this country since the Second World War, but the trouble is that time and again the Government have been overtaken by events. The Prime Minister


is a sort of Twelfth-hour Adventist. Devaluation was at five minutes past midnight, and we know the appalling circumstances in which that decision was taken.
One therefore has to ask whether the prices and incomes policy, on which the official Opposition hope they may have an unholy alliance with the Left-Wing of the Labour Party, and in that way embarrass the Government—and they would—is right. We, being peaceful, prefer merely to have abstentions on both sides while we take on the Front Benches, because it is worth bearing in mind the consensus between the two Front Benches which is increasing, and of whom the latest capture is the right hon. Member for Streatham (Mr. Sandys) by the Home Secretary, or vice versa, and there are numerous examples of which the Minister is aware. One is entitled, therefore, to ask whether the Government's wages policy will permit of sufficient flexibility to reward productivity.

Mr. William Hamling: The Chancellor said that it would.

Mr. Thorpe: The Government have said many things. But
By their fruits ye shall know them
We shall—therefore, wait to see the details.

Mr. Hamling: What is the point of the right hon. Gentleman asking questions if he does not believe the answers?

Mr. Thorpe: I thought that the hon. Gentleman was here yesterday.

Mr. Hamling: I was.

Mr. Thorpe: Then he will have heard the Chancellor say that productivity agreements will be without the scope of the 3½ per cent. ceiling. He also said that excluded from this stop on increases were those who could prove actual work increase. He also referred us to Report No. 36 from the Prices and Incomes Board on productivity agreements. All I can say is that that has been honoured more in its breach since this wage freeze started than in its observance.
If the Government believe that the 3½ per cent. ceiling will be the top ceiling on the results of wage negotiations and wage bargaining, at plant, district and

central level, combined and aggregated, I think that they will find it impossible to maintain. I also suggest that if productivity bargains are really to be rewarded—and I do not speak with the experience of many hon. Gentlemen opposite, but I have presented a wage application, and appeared before the Prices and Incomes Board on behalf of a trade union—we have to move into a civilised form of industrial relations, in which productivity agreements are encouraged and rewarded. If that happens, we can get some incentive back into our industrial society. There is nothing wrong, and I think the House will agree with this, with high wages. They are to be encouraged, provided they are earned and linked to increased productivity.
I would have hoped that the Chancellor would have given sympathetic consideration to co-ownership proposals. This is yet another incentive, not by way of substitution for nationally agreed wages, but as a definite incentive at plant level, for increased productivity. My right hon. and hon. Friends and I have, over many years, tabled new Clauses to the Finance Bill, and they have for so long been rejected that we know their acceptance is inevitable.
I believe that the restriction of dividends is right. I do not think that a wages and incomes policy has an earthly hope of acceptance unless there are restrictions on dividends as well. Attempts in the past to do this have not been successful, and I hope that the Chancellor will meet with greater success.
With regard to the S.E.T., whilst I welcome what the President of the Board of Trade said about assisting hotels—and I am not talking about the major loans and grants which he mentioned—I have always taken the view that what is infinitely preferable is a payroll tax.
We now know that the Selective Employment Tax is not primarily designed to cause a "shake-out"—to use the Prime Minister's euphemism for unemployment—from the service to the manufacturing industries, but is largely a means of raising revenue. If that be so, and accepting the artificiality of the distinctions between those who are affected and those who are not—for example, a brick manufacturer paid his 25s. and got back his premium, whereas the bricklayer's


employer would pay it in full and get nothing back, though one hardly knows why a manufacturer is making bricks if not for a bricklayer subsequently to lay them—a far better way of preventing people from hoarding labour would be a payroll tax.
This could be varied regionally. My hon. Friends and I worked out that, on the figures of S.E.T. in the first year of introduction, if the figure was 7s. 6d. per employee in the overheated regions and 5s. in the grey areas, with possibly, a total remission in the development areas, the Treasury would still get the same yield, but there would not be artificial distinctions and there would be a definite economic impetus to the areas which we want to help. I have not yet worked out what would be the comparable figures in the light of the new rates of S.E.T.
I must confess that it is staggering that, two years after the introduction of S.E.T., the Government are now asking Mr. Reddaway to consider how it has operated. We know that they introduced it without any idea of how it would work out. Someone kindly told them that agriculture and charities would pay S.E.T., and they said "Oh, we had not thought of that; we must try to put things into reverse." Seldom can a tax have been introduced which was so ill-thought out. I would have hoped that one of the priorities of the Reddaway Inquiry would be to see what effect the present increases in S.E.T. will have on the export prices of this country, since much of our balance of payments is affected by the services, particularly those given by the City, which, of course, pays S.E.T. in full. I would have hoped that Mr. Reddaway would be asked to address his mind to that.
Hotels are a special case, and I welcome what the Government have done. They, after all, cannot qualify for Board of Trade grants, and in 1966 they lost their investment allowances. I welcome it because in a rural area or a development area—I am not certain whether the two are on the same footing, or whether the former has to be included to be within the latter—the hotel industry and agriculture are usually the two largest employers. When they are "shaken up" as a result of S.E.T.—whatever the President of the Board of Trade may say, this is a fact—in that area of my con

stituency, which depends upon tourism and agriculture, where tourism is concentrated, the unemployment percentage, which may not be high numerically, as at 11th March, was 10·9 per cent. of the employed population. Therefore, this will be enormously important. However, I hope that the Government will not lose sight of the importance of many of the ancillary services in the development areas, which are playing a vital part in servicing the manufacturing industries in those areas.
I am pleased that the question of a lottery will be given to a free vote. The view which I take of that is still the one expressed by my right hon. Friend my predecessor on 18th April, 1956, in regard to Premium Bonds when he said:
I do not deny that the proposal for Premium Bonds is an imaginative one, but the need for a lottery is the result of inflation. It is only because no one has any faith in the value of money that we have to have this scheme, and its introduction is to some extent a surrender to inflation."—[OFFICIAL REPORT, 18th April, 1956; Vol. 551, c. 1075.]
I would like to urge upon the Chancellor that he might also have a free vote on the question of Premium Bonds, if only so that the Prime Minister could exercise his conscience to the full.
We well remember how, on 18th April, 1956, the present Prime Minister said:
what a commentary it is on the financial stewardship of the party opposite that the Chancellor of the Exchequer has to have recourse to such measures! In 1951, they promised us a 'Britain Strong and Free'. Now, Britain's strength, freedom and solvency apparently depend on the proceeds of a squalid raffle."—[OFFICIAL REPORT, 18th April, 1956; Vol. 551, c. 1026.]
I know that the Chancellor was careful to say that he did not attach as much importance to this measure in his Budget as the right hon. Gentleman the present Prime Minister did when criticising the Budget of Mr. Harold Macmillan, but unless it ceases to be squalid because the prizes are larger, I hope that we might have a free vote, knowing the Prime Minister's anxiety to put into effective practice when in office the promises and views which he expresses when in opposition.
I will deal briefly with one or two of the imposts in the Budget. I would first congratulate the Chancellor on abolishing some, but by no means all, of the Minister of Transport's appalling taxation proposals in the Transport Bill.


Since it was my hon. Friend the Member for Bodmin (Mr. Bessell) and some of my hon. colleagues who first put down the Amendments to the Transport Bill opposing these matters, having first attacked, it would be ungenerous not to congratulate the right hon. Gentleman for finishing off the job. Any further assistance which he might require in that direction we would be very happy to give—

Mr. Hamling: Where is the hon. Member for Bodmin (Mr. Bessell)?

Mr. Thorpe: He happens to be in Standing Committee F—as the hon. Gentleman would know if he took a little more notice of what happens in this place—under a guillotine procedure.
I hope, also, that, in view of the fact that the motorist will be hit three ways, by Purchase Tax, by the road fund and by the increase in the price of petrol, this will not come to be regarded as a luxury which must be stamped out or discouraged. In fact, particularly in rural areas, it will have a considerable effect on the cost of living. Firms making delivery charges, and many other ancillary forms of occupation, will find that their costs are considerably increased.
In the context of this Budget, I welcome the limited capital levy. It would be interesting to know what the position of trusts will be. Certain people will be paying tax at the rate of 27s. in the £, but because their capital sum is in trust they will not be able to touch it, unless they are enabled by the Finance Bill to go to the Chancery Division and ask for a release of capital. On tobacco, I had hoped for a duty stamp on cigarettes, releasing and encouraging pipe tobacco and cigars, but these are Committee points.
Perhaps the most tragic thing about the Budget—I repeat that I think that the Chancellor had to raise enormous sums because of the devastating economic situation which this Government and their predecessors have got us into—[HON. MEMBERS: "Oh."] If hon. Members opposite believe that the economy is buoyant and sound at the moment, they will believe anything.
One of the most disappointing things, not about the Budget but about this Gov

ernment's whole strategy, is that, while people are being asked to bear very heavy burdens—I think that is agreed on both sides of the House—the Government seem to come off lighter than anyone else. For example, there is no suggestion of following President Johnson's example with a 10 per cent. cut in overseas missions, and all we are told is that there will be no net increase in the Civil Service in the coming year. Nor is there any suggestion that the Land Commission, which is costing about £3 million, or at a conservative estimate £2 million, a year and bringing in roughly £250,000, is to be scrapped. There is no suggestion that the Transport Bill is to be modified.
It is the failure of the Government to tackle the question of public expenditure—and particularly the control of public expenditure—which partly necessitates the level of taxation which the right hon. Gentleman has pronounced. The Chancellor said that, as a nation, we must command the confidence of the world. But the Government must regain the confidence of the people.
This is a brutal and severe Budget to deal with an appalling economic situation and the right hon. Gentleman had very little freedom of manoeuvre. If the Government are to succeed, not only the machinery of the Budget is important. The Government must themselves show economic discipline and show that they are ahead of economic events and not always reacting to them in a panic situation. The right hon. Gentleman must show that he is prepared to set in train studies to streamline the tax system, many parts of which are archaic, that we will have a wages policy which will reward productivity and encourage plant bargaining—as opposed to across-the-board increases—and that there will be incentives to save. We must also press on with creating a new international reserve currency. After the events of last weekend this goes without saying.
There can be no denying that this is a tough Budget. The people of Britain are prepared to accept sacrifices, but only if they have confidence that they are sacrificing in a cause which will be successful. If we are not successful it will not only mean the end of this Government—that is of minor consideration in the passage of time—but it will represent a very great lowering of the standard


of living in this country and certainly in our position in the world.

5.32 p.m.

Mr. F. J. Bellenger: When I listened to the opening remarks of the Leader of the Liberal Party, I thought that he was about to disclose new methods and ideas which the Liberals have for our taxation system. Later, he appeared to indulge in some doubt about that. I gather that he wants a free vote on the Government's proposal for a National Lottery, no doubt because he is against such a project.

Mr. Thorpe: I accept that the right hon. Gentleman may have had that impression from my remarks, but I assure him that that was not what I said.

Mr. Bellenger: The right hon. Gentleman said that the National Lottery proposal would bring us no nearer the E.E.C. I doubt whether any proposals which the Chancellor might have introduced would have altered what is a political matter in that General de Gaulle, as the head of France, does not want us in the Community. Whatever my right hon. Friend might have done, we would not have stood a better chance than we stand now of getting into the E.E.C.
The Leader of the Liberal Party went on to deny the rightness of the traditional methods, as he called them, which the Chancellor has adopted. What else could my right hon. Friend have done? We are in a traditional situation. Germany recovered by hard work and traditional methods. I therefore do not see what my right hon. Friend could have done, or what alternative methods the Liberals would use, to get us out of what are traditional difficulties. Certainly the Leader of the Liberal Party was more cautious in his remarks than the vituperations of the right hon. Member for Enfield, West (Mr. Iain Macleod), particularly when commenting on the Prime Minister. I suppose that, to that extent, toujours la politesse.
I pay the Chancellor a personal tribute, not only for the ingenuity of the traditional methods which he has employed, but for the fairness of those methods. He was, and still is, faced with an appalling situation and he has endeavoured in his taxation proposals to spread the burden as widely as possible. However, some of

my hon. Friends will not approve of the ceiling limit being placed on wage increases. My right hon. Friend was right to say that the only way to earn higher wages is by greater productivity. Any hon. Member connected with business will agree that that is the only way for us to solve our difficulties.
We are in an inflationary situation, partly because we have been drawing on the future instead of the present. I am not surprised, therefore, that my right hon. Friend must resort to the machinery of hire purchase as one of the traditional methods to be used. In my younger days people did not use hire purchase to anything like the extent it is used today. We were taught to save before we bought. I regret that hire purchase has become a natural way of life and enables spending sprees to be undertaken without full consideration being given to the repayments. Hire purchase is now a great industry.
In paying tribute to the Chancellor, I remind him that I was for many years associated in this House with his father, who was a highly respected hon. Member. I like to think that my right hon. Friend has learned some lessons from his father, who was an honest man who believed in honest solutions. That is why I believe that my right hon. Friend is on the right lines.
It will not be easy for many people to pay 4d. more for a gallon of petrol or 2d. more for a packet of cigarettes. But that is their affair. They do not have to buy those things and perhaps there has been too much spending on items such as those without sufficient attention being paid to the hard work which alone will solve our problems. My right hon. Friend was right to say that we have two years of hard slog ahead. We may see the success of that slog and be able to enjoy some of the fruits of that hard work. It is all very well for the Liberal Party to speak about the need for changes in our tax system, but the hon. Members of that party have not suggested any satisfactory solutions.
I have a slight doubt about whether these large sums of increased taxation will produce the desired returns. Presumably they are based on existing situation and he has endeavoured in his my right hon. Friend will probably be right, but I am not sure that we will get


the increased trade, especially from America, on which some of his taxation proposals are based. I trust that the United States will be as co-operative as we all hope. If so, with the two greatest trading nations in the world, America and ourselves, co-operating, my right hon. Friend stands a good chance of success. If not, the situation will be appalling.
Although I cannot argue the matter in detail, all these proposals by the Chancellor are placed on the shoulders of the British taxpayer while the British taxpayer is paying out enormous sums for areas overseas which are sometimes squandered. I suggest that the Chancellor should have a talk with the appropriate Ministers to see if they cannot bear some of the burdens which our taxpayers have to bear.
On the family allowances proposal, my right hon. Friend shows that he has at heart the interests of parents, as he should have. He has done what he could in this respect. I hope that as time goes on he will be able to do more. I remind the House that when Germany was going through her troubles and there was the failure of the Credit Anstalt Bank there were 6 million unemployed there. Imagine the frustration of many young men who had spent years in study but could not even get labourers' jobs. It may be that that led to the war.
I hope that the special charges proposals will be explained if not this afternoon at some future date. The special charge is that where the investment income of an individual for the year 1967–68 ascertained as Parliament may determine exceeds £3,000 plus his Surtax personal allowance. I wonder what precisely is meant by that. My right hon. Friend will know that the first £2,000 is free of Surtax. Does this mean that the special charge will include only the investment income or will it be aggregated with investment income plus earned income or segregated?

Sir C. Osborne: Investment income.

Mr. Bellenger: Perhaps the hon. Member for Louth (Sir C. Osborne) has understood this better than I have. I want to know what precisely it means. If it is a wealth tax as my right hon. Friend suggested yesterday, one would assume

that it would be segregated on investment income only and Surtax would operate as it does now. Perhaps that can be explained in greater detail. I am sorry if I am too dense in these matters and not so quick witted as some hon. Members opposite, but yesterday I did not understand precisely what the actual purpose was. If it is a once-for-all tax such as Sir Stafford Cripps' proposal was, we could understand it. That tax was not a once-for-all tax as is evidenced from this proposal. It is as well that those in the Surtax range who are expecting a wealth tax should understand of what a wealth tax would consist. Obviously there will be opportunities in Committee to follow up points such as this.
I have no faith whatever in the Liberal Party's proposals. I remember when they said that they could solve unemployment and they produced a Yellow Book. They were not able to do it. To this extent I support my right hon. Friend in his so-called traditional measures.

5.45 p.m.

Sir Cyril Osborne: I am sorry that the Chancellor has just left the Chamber because I wish to pay him a tribute. He was most charming in the way he inflicted an extra burden of £930 million on the country. I do not know what he would be like—I suppose he would be quite irresistible—if he were to take off £930 million. It was an extraordinary effort to be so charming and yet to be taking all that money out of our pockets.
I fear that his Budget policy, however, must fail for two main reasons. The first is that the trade unions will not willingly accept another 18 months wages freeze. If this fails, all the other assumptions of the Budget will also fail and the Budget forecast will be as valueless and as great a mockery as the old National Plan.
The Government cannot ram down the throats of trade union leaders a wages policy which they do not like. This is fundamental. George Woodcock said of the Government last night:
I do not think they can sustain controls for another eighteen months. When they come to the crunch they compromise.
This means that the Government will give way and the whole policy will fall to


pieces. Frank Cousins, when he spoke from the benches opposite before he resigned, told the former Foreign Secretary, who was then in charge of economic affairs:
This scheme will not work".
He said last night:
the policy could not and should not work.
I ask the Chief Secretary, if this incomes policy fails and all others fail, what will the Chancellor do? What is the alternative? It seems that the whole policy is based on the assumption that he can get a wages policy worked by the trade unions. Surely we all realise that we cannot get a policy worked unless the trade union leaders are in agreement with it.
I do not believe that the policy of the Chancellor will succeed, because I do not believe that the balance of payments will improve as dramatically as the Chancellor suggested. I remind the Chief Secretary that the fourth quarter of 1967 showed a deficit of £350 million. For the whole year it was £540 million. So for the last quarter we were running a deficit of over £1,400 million. The only figure we have had since was that of the trade gap for February of £70 million, which is; the biggest we have had for a long time. It seems that the decline is continuing.
When the President of the Board of Trade was talking about this, I asked him how soon he thought we would start climbing out of the pit. He could not give an exact date, but he thought that it would be by the end of the first six months. I ask the Chief Secretary: will we make as much profit in the second six months to equal the losses we made in the first six months? If the Government achieve that we shall then be only square. We shall have done nothing towards the extra £500 million balance that the Chancellor has set his heart upon and which he said is necessary if we are  succeed.
Yesterday the Chancellor said that the trouble last year was partly caused by the closure of the Suez Canal and the consequent expense for Britain. That is true, but when does the right hon. Gentleman expect the Canal to be reopened? How soon will that loss be ended? I believe that the Chancellor's forecast that the trade will come into balance by the end of next year will be falsified by

events. Although the Chancellor is being cruelly truthful in some ways, in other ways he is hiding the real truth from the nation.
I believe also that the Chancellor's policy will fail and he stands condemned on these other grounds. First, he made no proposals yesterday to cut the vast national Government and local government expenditure, which is the very cause of all our economic troubles. Secondly, he has done nothing to stop the rise in the cost of living, which will be much greater than the 1 per cent., 2 per cent. or 3 per cent. he mentioned. If other industries follow the example of the gas industry and increase their rates on average by 8 per cent., the cost of living must rise by about 10 per cent. The Chancellor should be honest and tell the nation this.
Thirdly, the Chancellor has done nothing to stop general inflation. Here I repeat a protest which I have made over the 20 years I have been in the House. The Chancellor said nothing about proposals to save the holders of National Savings Certificates and War Loan from being swindled through inflation of the real value of their savings. It is as though it did not matter to the Government if Government securities became worthless pieces of paper.
Fourthly, the Chancellor has done nothing to encourage people to work harder or to save. The Budget proposals will have the opposite effect. Instead of increased productivity, I would rather talk about increased production. That can be measured better. When the Prime Minister said in July, 1966, that we were at a point of crisis, the index of industrial production was 135. It fell each month by one point to 131. It returned to 135, the crisis level, only last December. The way to get men to work at all levels of industry is to pay them well and let them keep what they earn. I know from experience that when management want men to work overtime the question the men always ask is, "How much, governor, must we pay in tax?" When it is sorted out for them, they often say, "We are not working for the Government". Until direct taxation is substantially reduced, the Chancellor will not get the increased production he needs.
Fifthly, the Chancellor has done nothing, and can do nothing, to stop the


increase in unemployment which will result from the present policies. This will please none of us.
Lastly, I condemn the Chancellor because he assumes that his increased taxation will reduce home demands for goods and, therefore, drive them to exports. The Chancellor cannot guarantee that this will happen. I believe that the vast majority of people will continue to buy what they want, and if they cannot pay for it from their earnings they will pay for it from their savings. The Chanecllor's assumption that goods will go from the home market to exports will be falsified.
The dilemma facing the Chancellor is this. If the Government want the capitalist system to work more efficiently, they must restore real incentives. If the profit motive is taken away from the capitalist system, it will not work properly. I believe that the Chancellor and the Government can have either a much more egalitarian society with less efficiency or a much more efficient system with less egalitarianism. This is the decision that the Labour Party and the Chancellor must take. If the Chancellor drives for more and more equality, essentially he will have less and less efficiency.
Sir Winston Churchill told us many years ago that he believed that equality was the enemy of quality. This is true. In addition, equality is the enemy of efficiency. If the Chancellor's aim is to soak the rich and bring us all down to a dead level, the economic machine will work less efficiently and he will not get the results that he wants.
I do not believe that it is any good making appeals to the people on moral grounds. In 1949 Sir Stafford Cripps made this appeal when he was faced with an almost identical problem to that which faces the Chancellor today:
These economies, like devaluation, are a prelude and no more to a new surge forward to conquer the hard currency markets without which our industries, our standards of living, indeed, our civilisation itself, must face and wither away.
Then he said dramatically:
Mr. Speaker, we dare not fail in our efforts."—[OFFICIAL REPORT, 26th October, 1949; Vol. 468, c. 1353.]
Stafford Cripps was a man of great moral stature. He was surrounded by

men of immense stature. Ernest Bevin represented the trade union movement in the then Labour Government in a way which no one on the Government Front Bench today can represent the trade union movement. There were other men of great stature in the Labour Party. The unions would not listen to Stafford Cripps's appeal in 1949. His appeal failed. Why do the Government think that the present labour leaders will listen to the present Chancellor when their predecessors would not listen to Stafford Cripps in 1949?

Mr. W. A. Wilkins: I well remember Tory Members calling Sir Stafford the apostle of austerity and gloom. The hon. Gentleman is changing his tune.

Sir C. Osborne: Sir Stafford was called that. The hon. Gentleman is making my point for me. This was strength through misery.

Mr. Wilkins: It is necessary to have a good memory in this place.

Sir C. Osborne: Good manners are also required at times. Finally, I do not believe that a moral appeal by the present Government can hope to succeed any more than it did in Sir Stafford Cripps's day. In Sir Stafford Cripps's day we paid 19s. 6d. at the very top in Income Tax and Surtax.

Mr. Wilkins: I did not.

Sir C. Osborne: The hon. Gentleman has never been clever enough to earn sufficient money to pay that. We told Sir Stafford Cripps and subsequent Conservative Governments showed, that to get results direct taxation had to be reduced. Under this scheme we shall be paying 27s. 3d. in the top rates of income. With taxes like that one cannot expect from industry the results which the Government need. On those grounds, I say that the whole of the Budget proposals will fail.

6.0 p.m.

Mr. James Hamilton: Yesterday, the Leader of the Opposition described this as a very hard Budget. I agree wholeheartedly with that opinion, but from then on the right hon. Gentleman and I part company. About two weeks ago, the British Press warned that this might easily be the toughest Budget in


Britain's history, and now it is recognised by all of us to be a Budget of that kind. But, in their usual fashion, the Opposition make carping criticisms against it. It was noticeable yesterday, when the Chancellor spoke of his wealth tax, that the Opposition went frantic. I am only sorry that they should attempt to lecture us on this side about the workers and what they should do.
In 1958, the Chancellor of the Exchequer at that time resigned from the Tory Government. A few weeks ago, in another place, he revealed that the reason for his resignation was the then Government's economic policy. He said that, if the Government had paid attention to his view at that time, the view which led to his resignation and that of two other prominent members of that Tory Government, there would have been a distinct possibility of our not being in our present difficult situation. He told the other place that, if they had carried out the policy which they ought to have pursued, the Tories would have lost the 1959 election, but they could have gone a long way towards remedying the country's economic ills.
I have many criticisms against this Budget, but, bearing in mind that we have a deficit of £540 million, previous Chancellors of the Exchequer, without exception, having done only a patchwork job, I realise that now, with the present Chancellor's approach, there is a distinct possibility that, putting our best foot forward, we shall have the industrial expansion which we all want to see achieved.
One hon. Gentleman yesterday said that the increase in the motor vehicle tax, in the petrol duty and in the tax on cigarettes could be deemed taxes on the working people. Many workers now enjoy the privilege of having a motor car. In my view, the workers of Britain are entitled to have motor cars; many use their cars to travel to work and they use them also for the only enjoyment which some of them have, that is, in being able to take their families out at weekends. I am sorry that the Chancellor has resorted to heavier taxes on motoring, because they could prove damaging to our electoral hopes in forthcoming elections.
I am sorry also that he has raised the Selective Employment Tax by 50 per cent. None the less, we should not forget that many employers are enjoying the

premium supplement which goes to manufacturing industries. As I go about my constituency and talk to industrialists, I do not hear them express the gloomy view which we are hearing in the House today. Since devaluation, one leading firm in my constituency, a manufacturer of computers and one of the largest exporters of computers in Britain, tells me that its order book has increased by £1¼ million. Another firm, an American firm, tells me that its orders have increased by £750,000. Their big problem now is that they cannot fulfil their obligations to the many customers who want their products. These facts must be borne in mind when we talk about the Selective Employment Tax. Those two firms get the S.E.T. premium.
A great deal has been said about hotels. Three new hotels have been opened in my constituency within the past three months. That does not lead one to believe that British hoteliers are suffering greatly under the Selective Employment Tax.
Scotland is in a peculiar position. Increases in gas and electricity prices and in postal charges have been announced. The price of gas in Scotland is already 24 per cent. higher than in any other region, and now an additional burden is to be put on Scottish people by the Budget. I earnestly counsel the Chancellor to consider the special problems of Scotland and the other parts of the country classified as development areas. [An HON. MEMBER: "Hear, hear."] Perhaps the hon. Gentleman opposite who said "Hear, hear" is one of those who are worried by the attempt to tackle dividends.
We shall never get the workers to co-operate with us unless we show a keen desire to deal with those who have, over the years, the so-called years of prosperity, enjoyed the special benefits of dividends. Obviously, with 90 per cent. of the wealth of this country still in the hands of 10 per cent. of the people, we must give serious thought to our tax system. The talk about a hard Budget brought to my mind the well-known song, "A hard day's night", and the "pop" group who introduced it. If the Chancellor tackled the "pop" groups who are making fabulous sums of money, so much so that many are banking in other countries, going for them in the same way as he tries to go for the


workers, there would be a chance of our getting some of the money which is so urgently needed.
A great deal has been said and will be said, both in the House and outside, about the prices and incomes policy. I have already made known my opinion that the Government are ill advised to continue their present prices and incomes policy. The right hon. Member for Enfield, West (Mr. fain Macleod) said that 14 Orders have come before the House on wages but not one on prices. I am with him in the criticism he makes of the policy. We find out that price increases are imposed and we can then make representations to the appropriate Department but the price increase is already on before one makes the representation. It is a different matter entirely with wages, because the increase is not granted until it has been examined by the Prices and Incomes Board.
Unless workers can see that prices are dealt with in the same way as wages there is no chance of getting them to accept the policy. The engineering workers form one of the largest sections of workers in this country. The Confederation of Shipbuilding and Engineering Unions carries out wage negotiations on behalf of 3½ million workers. Over the years since 1946 the increase per hour in wages has moved from 1¼. in some instances to 3½d. in others. The present norm laid down by the Government is 3½ per cent. But at the same time it is permissible to make productivity agreements at a local level. In the engineering industry that has been happening over the piece rate for quite a considerable period. Most of the workers are on piece rates or have bonus earnings. But the 3½ per cent. norm will obviously be totally unacceptable and inadequate to meet the needs of the lads on fixed wages working with local authorities, in hospitals and so on—the labourers, who have no chance to increase their wages at local level. Devaluation and the new Budget impositions mean an added burden for the lower-paid worker. The Government should give serious consideration to this.
I have said many times in the House that the sooner we introduce a minimum wage the sooner we can get the sort of approach we want from the people in

industry. I read only today that there is twice the productivity from the workers in American industry that there is in this country. That could be an indictment of techniques and management in this country, because the article I was reading added that no only are the Americans getting twice the production but that the labour effect is not nearly so great as that of the workers in British industry.
Only a few short weeks ago the trade union movement decided to apply its own voluntary policy. The criticism of that decision was that the policy was accepted by only a very small majority, and that the Government therefore have no guarantee that the trade unions will accept it. I have always been taught that when a democratic vote is taken in a democratic society the decision is conclusive, and therefore I expect that all of the unions and trade union leaders will accept that democratic decision. I should like the Government to allow the trade unions to operate their voluntary policy, bearing in mind that a wage application does not bear fruit until at least 14 months after the negotiations begin. That has been my experience in the engineering industry.
All Governments have recognised that the trade union movement is a responsible body. When the Opposition were in Government they asked the trade unions to become members of "Neddy", and they are still playing a very important part in it. The movement has proved over the years that it is responsible. We have rogue elephants within it, but there are also rogue elephants in British management. Many managements tell trade unionists, "We are prepared to give you a wage increase, but you are not getting it because of Government policy". That is done with a view to causing a breach between the trade union movement and the Labour Government. I am not prepared to fall for that.
I ask the Government to give the unions the right to operate their voluntary policy. I am quite convinced that they will operate it responsibly. If the Government are prepared to recognise that, they can go a long way towards having the Budget accepted and at the same time towards acceptance by the British working man that the Government are determined to lead him to the prosperity that all want to enjoy.

6.17 p.m.

Mr. R. Gresham Cooke: I was interested to hear the attack by the hon. Member for Bothwell (Mr. James Hamilton) on S.E.T. and the petrol tax. Knowing that he represents a constituency near one of the largest motor factories in the country, I realise that he knows only too well the effect that the fuel tax and the road transport taxes might have on the motor industry. We were all very interested to hear his views on the prices and incomes policy, based on so much experience, and we look forward to his being in the same Lobby as us on that issue.
What needs to be made crystal-clear in the debate is that Estimates of expenditure as between this year and last show an increase of £922 million, as disclosed in the Financial Statement. It is for that reason alone, as I see it, that the extra taxation that the Chancellor has imposed amounts to £923 million, giving him a surplus of £1 million over his costs. All talk about devaluation, its after-effects and so on, is quite superfluous. If the Chancellor is an honest man, as I believe he is—and indeed was so described by the right hon. Member for Bassetlaw—and he did not want to borrow money, he had to increase taxation by £922 million. As we pointed out in the debate on the Vote on Account on Monday, he was already committed to about £1,000 million of extra expenditure. Despite the smooth assurances from the Chief Secretary on Monday that we were talking rubbish and that expenditure was going up by only about 1 per cent. next year, there has been and is a rise of nearly 10 per cent. If expenditure and the Estimates had been held at last year's figures, none of the extra taxation would have been necessary.
The Vote on Account shows the rake's progress there has been since the Labour Government came to power. Expenditure in only the first third of the year is shown to be £400 million more than a year ago, which in turn was £700 million more than the year before that, which was £300 million more than the year before that, which was £200 million more than the Conservatives left it at in 1964. Returning to the Estimates, we find that the total Estimates in 1964 were £6,549 million and that they have

now risen to £10,517 million. The Estimates are up by £4,000 million in four years, an increase of 60 per cent. That, of course, is the real meaning of Socialism. That is the wild rush into social reform of every kind. When one listens to all the demands made by hon. Members opposite, one realises that they would like to hypothecate the whole of the gross national product for Socialism and social reform.
What has happened to the savings we heard about on 16th January? They have disappeared into the mist. They have gone with the wind. We are justified now in saying what we said then—that they were bogus. Parliament at present is unpopular with the public, who say that we have no control over expenditure and the financial toboggan ride of the Government. They are right. No doubt the Press will say once again that by not being allowed to debate the Estimates—we only had debates on the Army, the Navy and the R.A.F.—we are attempting to shut the stable door after the horse has bolted.
What the Chancellor should have done, when faced by the 10 per cent. rise in the Estimates, totalling £1,000 million in the light of the severe financial position, was to insist on all Estimates being cut by 10 per cent. One could start with Class I of the Civil Estimates. The first four items are the House of Lords, the House of Commons, the Treasury and the Department of Economic Affairs—all up by 10 per cent. over last year. The House of Commons expenses have doubled since 1964 and, in common with 50 million other people, I wonder what on earth we get from the House of Commons which is worth double the money spent in 1964.
We should have given an example to the nation. We could cut the fuel bill for this overheated place. We could cut out a few sheets of notepaper and other things. We could certainly have achieved a cut of 10 per cent. in expenses of the House of Commons. We could have cut out the D.E.A. altogether and gone back to Treasury control, which would have saved several millions of £s and kept the Estimates down. I hope that the Financial Secretary is taking all this in and will pass it to the Chancellor. Local councils have to do this to keep down the rates. A year ago, my own borough


said that the estimates for all its departments should remain the same as the year before. Why should not the Government do that? There is no hardship in deferring a number of projects for the future.
The Supplementary Estimates at the end of this financial year will probably come to an extra £350 million. Thus, if the Estimates had remained the same as last year, then, plus the Supplementary Estimate of £350 million, the Government would have kept spot on to the 3½ per cent. extra that they are asking the nation to accept. This would have avoided the Chancellor having to clobber the public through taxation on motoring and services, Purchase Tax, tax on the rich, and the rest.
Like my right hon. Friend, I ask why is it that the public alone have to bear the Government's extravagances. Why should not the Government bear some of it themselves? It is expected that there will be a massive switch to exports, but every item of Government expenditure—housing, education, roads, public buildings and so on—entails more consumption through more timber, more raw materials and more imports. There is one consolation in the Budget, in that I hope it marks the end of the sort of surreptitious borrowing or inflation by creation of manufactured money—self-generated Government credit. I think that the Chancellor has been honest over that.
I have a grave suspicion that in the last three years, a large part of Government expenditure has been met by their own credit. It is all too easy. The Government issue a Treasury bill, which is met by the banks, which then take it to the Bank of England, which is under instructions to meet it. The Government are thereby self-generating their own credit. Estimates of the amount involved vary. I have seen an estimate of £800 million for the last two or three years. Last year, money supply increased by 7 per cent. as against an increase in the real national product of 1 or 2 per cent. That must surely mean inflation for last year. I hope that what the Chancellor is doing this year means that the Treasury will avoid this course in future.
Faced with the balance of payments situation, the Chancellor must make a

serious attack on imports. I am not as optimistic as the President of the Board of Trade. In 1967, our trade deficit was £540 million, which is about the same as it was in 1964, considered to be a bad year. Imports rose by £601 million. Every import means that manufacturers and merchants are buying foreign currency forward and, when we do that to the extent of £600 million more than we are exporting, sterling is weakened by that amount.
We got off to a bad start to 1968 last January. The position was worse then than it was the year before. There has been a spending spree, with foreign refrigerators, washing machines and the rest coming here. I have followed the motor industry's figures fairly closely, and I see that the number of imported cars in January nearly doubled, from 6,000 to 10,000. At the same time exports of motor cars fell from 48,000 to 41,000. This sort of thing is madness at a time of balance of payments problems. The spending spree has unfortunately come from savings. There were very big withdrawals of building society savings in January.
This Budget is the equivalent of deflation. I do not think that that necessarily means that imports will fall. They will be more expensive owing to devaluation. Under Article XII of the General Agreement on Tariffs and Trade, a country threatened by a serious decline in its monetary resources is entitled to use temporary import quotas. I think that it would be madness to import Argentine beef in April. We cannot afford it. If necessary, I would set quotas for a number of products we could well do without, including possibly beef. Many other countries have quota systems and we might have to come to quotas for some products.
I hope that in looking at the sterling area and at the Commonwealth preference system as a whole the Chancellor will consider the working of the Commonwealth preference system. Foreign goods coming here pay a duty of about 20 per cent. The products coming from Australia come in free of duty to the extent of 99 per cent. and from Canada to the extent of 96 per cent. But only 67 per cent. of our exports to Australia, Canada and the rest of the Commonwealth go in free of duty. We ought to


have more equitable trading arrangements with the old Commonwealth. It is not half as dependent upon us as it used to be. They are no longer developing countries. Imports of timber and wool from Canada and Australia have gone up not by the 16⅔ per cent. price increase which would be justified by devaluation but by 20 per cent. because the market for timber and wool is so good. That shows that Australia and Canada are not as dependent upon us as they used to be.
There should be a real attack on imports from the Commonwealth and the world, an attack in favour of imports substitutes. Substitutes should be produced instead of importing materials. We should use plastics and concrete for timber, nylon for wool, our own steel reinforcing bars instead of importing them. We could also attack the imported food bill. Our current account not only with foreign countries but with sterling has been in deficit for years. We have been too generous with our arrangements.
My message to the Chancellor is to stop toughening up on the poor taxpayer and start toughening up on himself. He should not listen to back benchers squealing for more and more expenditure, because if they get their way there will be even worse trouble next year. The public are losing confidence not only in the Government but in Parliament. If we are not careful we shall slide into a situation where a de Gaulle will have to come to the rescue of the nation.
We have to cut imports; we may even find quotas necessary. We must examine the weaknesses of the sterling area. By itself this Budget will not save the nation. There will be worse to come for the rest of the year on the balance of payments front. We are still in great danger, and I am pessimistic, like my hon. Friend the Member for Louth (Sir C. Osborne). By the end of this year we may have to recall the prayer that we say at the beginning of our day here:
… laying aside all separate interests, prejudices, and partial affections
seek
Public wealth, peace, and tranquility of the Realm …".

6.34 p.m.

Mr. Norman Atkinson: The hon. Member for Twickenham (Mr. Gresham Cooke) seems to have discarded

democracy altogether and is now suggesting that the system has failed to the extent that we need some sort of British de Gaulle. It is a horrible reflection on hon. Members opposite when he is condemning his own party to oblivion, suggesting that it is incapable of finding a solution. I agree with what he said about import quotas, but I want to return to some of his earlier remarks and to some remarks made by the right hon. Member for Enfield, West (Mr. Iain Macleod).
The first thing that we can accept is that this is a bankers' Budget. It is certainly not a Socialist Budget. I would accept the description given to it by the right hon. Gentleman and the Press generally. When history comes to be written of this period it will show that the present Government have yet again been blown further off course by their own Budget. I am convinced of this. When one applies some of the lessons learned from the past to the situation ahead it is a sorry story of missed opportunities, and it is certainly a victory for the consensus that now exists between the City and the Government. It is a defeat for expansionists and wage earners, and particularly for organised workers. The whole purpose of the Budget has been to placate bankers and speculators—to maintain confidence, it has been said. It will not maintain any confidence in the Government among trade unionists or among my colleagues from the so-called Left of the party.
I notice that the Press and television commentators have gone outside politics and in the main outside the trade unions in searching for analysis and comment on the effectiveness of the Budget. They have gone abroad to many markets asking their opinion of the Budget and the Government. What fantastic places to go to! Certainly to go to the foreign exchange operators in this country to ask for an opinion is a fatuous exercise.
If hon. Members were to ask any London bus conductor to put them off at the London Foreign Exchange he would put them off at the next telephone box, because that is all it consists of—nothing more than a group of well-informed, industrially illiterate people on the ends of telephones. It is time we killed this myth that there is some precise instrument somewhere called a Foreign Exchange which is able to


measure the effectiveness of our Government policies and adjust accordingly the rate of exchange between sterling and the dollar. What nonsense this is! It is non-existent; and these people are certainly less able than many others to comment on our policies.
It is often asked: what are the demands of bankers and foreign exchange merchants? In this Budget they have got what they asked for. Their demands have been fully met. The incomes policy has been attacked and there have been massive cuts in Government expenditure, despite what hon. Members opposite may say—including prescription charges. These were the cuts recommended by financiers throughout the world, by dealers in gold and currencies. This will mean absolute disaster for the Labour movement.
It is interesting to note that there is always a run on the £ when the Government are putting into effect policies capable of solving our basic economic problem. When the present Government are behaving in their most constructive way there is a run on the £, a lack of confidence among these people. We can recall steel nationalisation, giving the steel industry a chance to meet the requirements of the country, the I.R.C., and investment in machine tools. When these policies were being effected the value of sterling was at its lowest. This was a comment by the financiers on the effectiveness of the Government's policies.

Mr. Nicholas Ridley: The hon. Gentleman mentioned steel nationalisation. Is he aware that since steel has been nationalised the industry has drawn £252 million worth of taxpayers' money out of the Exchequer? Does this not confirm that it was not such a wise and profitable move?

Mr. Atkinson: I was putting a case which is borne out by experience. The steel industry has been incapable of providing the capital development needed. If we are to solve the basic economic problem of the country, we have to do something about steel investment. My point is that while our Government pursued this policy, the £ was at its weakest. This is a most illuminating comment, because it illustrates the political bias of these people. The attitudes and analyses coming from foreign exchange mar

kets are absolutely valueless and should be ignored by the Government. In no circumstances should they be influenced by the demands made by such people.
I want to refer to some of the political consequences. It is a fact of Budget time that it is a period of political development when the differences between Socialists are highlighted. It has happened in the last three or four years, and it is certainly the case now.
Labour Governments exist in a hostile economic environment. Whatever their policy, the economic environment is hostile to their political concept. Therefore, the Government must either concede political and economic principles to their opponents and work in a consensus arrangement or, if they reject that, start to pursue a Socialist policy which must inevitably be hostile to those sources in the economy whose confidence they attempt to gain. In other words, a Government who pursue Socialist policies can never have the confidence of those to whom they are opposed. That is an obvious fact, but one which has tremendous political implications. Therefore, the argument on this side of the House for many years is whether a Labour Government should be a consensus of themselves, the City and industrialists.
It is always said that a Labour Government cannot do otherwise, which leads us to pose the question: can a democratic Socialist Government exist in a situation of this kind, or must it always convert itself to a Social Democratic Party once it comes to office? This is the basic problem which we must face. According to many, it can be a Socialist Party only while it is in opposition, but once it has to govern in a hostile environment it changes its character from democratic Socialism to social democracy. It is on that basis that the consensus begins to work.
What has the party to sacrifice in order to proceed on a consensus basis? To be a Socialist Party, it must be aggressive against the system. It must attempt to shift power from private to public control. It must use investment, imports and exchange controls. It cannot, while pursuing policies of that sort, prevent a run on the £, nor can it prevent financiers throughout the world, particularly speculators, from


taking action to weaken the base of the Government.
But the present Government have decided, by popular vote in the Cabinet, certainly by a majority of nodding heads, to reject Socialist policies. Therefore, they are not pursuing a consensus policy. They have agreed to non-intervention in economic control and to give guarantees to both the City and industrialists for market freedom. But, more important, because they have changed their character to social democracy or have adopted the characteristics of a Government pursuing social democracy, they have had to accept selective State benefits, and to me this is a victory for what is now neo-Gaitskellism. It is Jenkinsism within the meaning of our party constitution. Going in the same direction, they have to adopt policies of more indirect taxation because the ultimate of the argument for selectivity within our society is of necessity the complete abolition of direct tax.
The Chancellor of the Exchequer said yesterday that the Budget must work without impairing the running of a mixed economy. [An HON. MEMBER: "Quite right."] Quite right," my hon. Friend says. This is the conclusion to which many hon. Members on this side of the House have come, excluding myself. None the less, my right hon. Friend said that the Budget must be judged by the criterion that it must work without impairing the running of a mixed economy.

Mr. Alfred Morris: As there is puzzlement or the faces of hon. and even right hon. Members opposite, can my hon. Friend explain the difference between a democratic Socialist Party and a Social Democratic Party?

Mr. Atkinson: I thought that I had done that by establishing some of the principles by which we must judge the purpose of the Budget and the political purpose of the Government. I hope that I have shown what the difference is in real political terms.
The Budget goes totally against the purpose, policy and constitution of the Labour Party. It is a defeat for our constitutional commitment, if we understand the Budget in terms of Clause 4, because it perpetuates the idea of ourselves being part of a social democratic movement.
I turn to some of the aspects of the Budget which illustrate my point. There are many good aspects, the Chancellor will be pleased to know. It has sealed many loopholes. It has sealed up the capital gain arising from insurance investment which was indulged in for long enough. My right hon. Friend has put an end to some of these practices, and I congratulate him. But some of the planning aspects of the Budget are nonexistent. If we add about £150 million to the cost of motoring, it can be argued that that is a good progressive tax because it aids the planning of our kind of society in which motor cars are becoming more numerous. But it is not planning when we merely take £150 million from the economy in this way without giving back something to public forms of transport. It is a good tax if we balance what we are taking from the motorist by making possible cheaper bus fares, easier travel for buses and, possibly, aiding the railways.
But what sheer idiocy it is—I could scarcely believe my ears when I heard it, but I read it in HANSARD and it must be correct—that the Government are to shatter their own policy for the sake of cutting down the dole of sickness benefits by three days to pay for some other aspect of social benefits. This is what the Chancellor of the Exchequer said. We have got to the bottom of the barrel when we start doing this sort of thing. We have always accused hon. Members opposite of having a complete disregard for the social needs of our people. Yet during our people's greatest need, when they are unemployed or sick or injured at work, we squeeze them to the last and take away the three days' benefit. What sort of economic reasoning is this? I am sure that it is a mistake. Some senior civil servant must have had trouble with his in-laws who have been on the dole. It cannot be proposed with any sanity to take three days' dole in this way.
I should like to put the record straight on prices and incomes because of the figures which have recently and repeatedly been quoted. To reintroduce wage legislation spells economic disaster for our movement. We must recognise the economic weakness of the argument that continued wage legislation of this sort has something to do with our economic recovery. I agree with the right hon.


Member for Enfield, West that we can discard the idea of a 3½ per cent. ceiling on dividends. It is nonsense. It does not apply to our economy and will never work. The Government have no intention of making it work, for there cannot be a statutory limitation on dividends while allowing the elements of this kind of society to continue. The Government know that it cannot be done, so we can disregard it completely. The same applies to prices. The Government will make no serious attempt to control prices. Therefore, we can disregard this, too.
We are left with a Government policy of wage limitation by legislation for the purpose of cutting back wages. There is an argument that wages are the root cause of our problem. It has been suggested over recent months that part of the £800 million deficit which the present Government inherited from the previous Government occurred because wage earners were taking far too much out of the economy, something to which they were not entitled. What is the record? I think we should put this on the record for the benefit of the T.U.C., if for no one else. I want to be very careful about the figures. The figures I am giving are Government figures and from sources which are available to all hon. Members.
From 1960 to July, 1966, wages rose by 44 per cent.; prices went up by 22 per cent. From July, 1966, to June, 1967, which was the period of freeze and severe restraint, wages went up 1·8 per cent. and prices 2·9 per cent. During that period wage earners had a deficit of 1·1 per cent. From July, 1967, to November, 1967, up to the date of devaluation, wages went up 4 per cent. and prices went up 1·8 per cent. So the wage earners benefited by 2·2 per cent.
One can estimate that from November, 1967, to November, 1968, wages are likely to increase by 4½ per cent. but from our knowledge of the period of severe restraint and freeze, when legislation was being used effectively against wage earners, and looking at the drift which took place then and its effect upon prices, we can anticipate a not less than 7 per cent. increase in prices between November, 1967, and November, 1968. If we add the cost of devaluation and the cost of the Budget to the costs of the other measures which are introduced by the Government, with

the cuts in capitalisation and so on which have taken place in the nationalised industries, we can anticipate a minimum 7 per cent. increase in prices.
The fact remains that from 1960 to November, 1968, wages, including the anticipation I have just made, will, possibly, go up by 54·3 per cent. and prices by 33·7 per cent., wage earners having made approximately 20·6 per cent.
Production during the eight years from 1960 to 1968 increased by 23 per cent.—or will have by the time we get to November this year.
This is the case we put to the Government, that wage earners have taken 2·4 per cent. less than they are entitled to, and, far from being a contributory factor towards deflation, wage earners have been most restrained over that eight years and cannot in any way be blamed for the inflationary tendencies inherent in our kind of society.

The Financial Secretary to the Treasury (Mr. Harold Lever): My hon. Friend has adjusted the figures by weighting—I am following very carefully—to allow for a rise in the cost of living. Has he reduced the increase in production in the same manner to allow for the 7 per cent. at constant prices? Would he care to recite to the House the increase in production which has taken place at constant prices to compare with the increase in wages at constant prices which has taken place?

Mr. Atkinson: Certainly. I am using productivity figures which are claimed by the present Government and the previous Government. It is they who claim that, having adjusted the prices, there is an increase in hardware in this country of that amount. Therefore, if they are arguing that it is not right for the wage earners to get the increase they were being given, according to both the Tory Government and the present Government, their production increased between 1960 and November, 1968—as we anticipate it will by the time we get to that month—and the increase will be 23 per cent. in actual solid gain. Therefore, wage earners were entitled to a share of that 23 per cent. From 1960 to 1968 export prices at 1960 prices went up 20 per cent.—less 8 per cent. now, of course, for devaluation.
There is no doubt that we remain competitive with all the countries with which


we compete on the Continent. The figures bear this out. So whichever way we look at this there is no case for the wage earners to answer between 1960 and 1968.
There are other reasons for inflation in this kind of society. The reason is not that people are being paid wages to which they are not entitled. My conclusion is that the Budget will not help but will make matters very much worse. We have always argued the case for a high-wage economy. That is the whole of our case. We believe in low unit costs, and this is one of the problems of our kind of economy. This is where we begin to fail. If we look at the areas of the country where employers are paying the highest wages we find they have the best export record and the lowest unit costs. That shows very clearly indeed the kind of policy we should be pursuing and the sort of Budgets we should be getting—Budgets which will help policies of that kind, to enable the country to understand that that is the right road, to take advantage of our opportunities which our engineers and others offer to us. The Government should look at unit costs in industry, look at where our successes are and analyse the figures, and they can come to no other conclusion than that wage restraint is not the way of achieving maximum growth, and that maximum growth is not possible while we have restraint of wages.
So my appeal to the Government is to look again at the case for introducing wage controls. If they do, I am convinced we shall be back to an expansionist policy giving us great opportunity for making devaluation work, and making it work on the basis of past growth.

Several Hon. Members: rose—

Mr. Speaker: I would remind the House that every long speech cuts out an hon. Member who has an equal right to speak.

6.58 p.m.

Mr. Peter Hordern: The hon. Gentleman the Member for Tottenham (Mr. Atkinson) had some difficulty, I thought, with the term "constant prices". I must say I share his suspicion of the concept of constant prices, which is one thing the Government use in relation to their own expenditure, but

which they never use in adjusting rates of taxation accordingly.
In the hon. Member's reference to Socialist democrats and democratic Socialists, it seems to me that the difference is that his Socialists are not sufficiently democratic and that his democrats are not sufficiently Socialist. I gather that was the point the hon. Member was making.
This is a unique Budget, unique in its severity and unique also in the circumstances in which it has been presented. It is unique because the size of it, if not the shape, has, in my view, been dictated by our overseas creditors, and this can be demonstrated quite clearly by the fact that only a few weeks ago the Chancellor was talking in terms of a 4 per cent. growth in the gross national product for the coming year. Quite clearly, the figure is now down to 3 per cent. That is clear evidence that the total size of the taxation now proposed has been increased quite recently and more probably by outside agents.
The House has to consider whether the taxation proposals will be sufficient to restore confidence in sterling. Given the predilections and prejudices of this Government, the Chancellor has done what he can to restore confidence abroad through the Budget. I do not think that any hon. Member could criticise it for not being sufficiently severe, but that still does not answer the question about a return of confidence for a really long period of time. The uncertainty still exists because confidence has been so shattered by the Government during their three and a half years of existence and because confidence is a tender plant which requires careful nurturing if it is to be re-established. It would, for example, be encouraged if the Government showed that they had a real grip on the size of Government expenditure. It would be encouraged to grow if they showed a favourable attitude towards risk-taking and towards savings. It is in those respects that the Budget fails utterly.
If only the party opposite realised what one meaningful gesture would do to restore confidence, I believe that it would be surprised at the ease with which it could be restored. Even now, if the Government were to drop the Transport Bill, it would put the level of sterling


way above its present rate, and it would be likely to remain there for a long time.
The fact is that there is no incentive for savings in the Budget and, in my view, it is essential to make savings a good deal more attractive than they are at present. Some special effort is required to attract savings from consumption, and I do not believe that the Budget will have that effect.
I noticed some weeks ago that Professor Alan Day recommended that the tax allowance available on premium payments on insurance policies should be increased from two-fifths to three-fifths. That is just the sort of incentive which would appeal to young people who are beginning to earn a little more, and it would also have an economic advantage in that the benefit would not be experienced for at least another ten and probably another twenty years. That is the sort of benefit which is required at present.
I regret that the Government, as always, show themselves to be antagonistic towards the whole concept of savings, and I think that part of the reason is that they feel that, if they make any concessions, it is those with wealth and capital who will take advantage of them. However, it is high time that the Government realised that, if they are serious in their intention to encourage savings, it is essential to cease trying to divorce those with capital from the incentives. From the overall national point of view, surely it is worth allowing those with capital already to get more capital if by so doing there is a considerable incentive to increase total savings.
As the Financial Secretary to the Treasury is present, I must refer to one matter in the Budget, and it is the extraordinary absurdity of the proposal attaching to scrip issues. The Financial Secretary is a man with great expertise in these matters. He must be horrified at the absurd suggestion that scrip issues should be treated as distributions and no longer simply as a method of bringing the reserves in a company more into line with the capital employed. It is no form of distribution of extra capital or income. It is merely an adjustment. Yet we have to stick solidly to the absurd suggestion in the Budget for all to see because the

Left-wing of his party does not understand it and wishes to propagate the idea that it is something against which we should legislate.

Mr. Harold Lever: I would be grateful if the hon. Gentleman could make clear what his point is. Is he complaining that the Government are treating all scrip issues as if they were distributions of income for the purpose of taxation, or has he not read the Resolution attaching to the matter with due care?

Mr. Hordern: I apologise at once if I am not correct in what I say. As I understand it, all scrip issues are to be treated as distributions. If that is not the case, I accept at once what the Financial Secretary says. However, I can tell him that that is widely thought to be the position, that companies will be debarred from making scrip issues in future.

Mr. Harold Lever: The fact that an illusion is widely shared hardly justifies any criticism of the Government. I honestly think that these discussions will be more informed and accurate if we await the Finance Bill rather than attempt to interpret the Resolutions.

Mr. Hordern: I take that point, and certainly we will deal with it then. I hope to be able to return to it on another occasion.
Nevertheless, without question, this is a Socialist Budget, no matter how it is dressed up. It does not matter that it has been presented in a rather superior fashion to that to which we have become accustomed in previous Budgets. It may be a case of dressing it up with a sort of sauce Hollandaise a la Jenkins, but it is really the usual sauce of the H.P. variety to which we are accustomed from the Prime Minister. It is just as much a Socialist Budget as we have had in the past, particularly in view of the Chancellor's intention to tax wealth and capital.

Mr. Michael McGuire: Mr. Speaker, could you possibly untangle the lines of communication between my hon. Friends on the Left-wing, who feel that this is not a Socialist Budget, and the hon. Member for Horsham (Mr. Hordern), who thinks that it is? If they were more clear, it would help considerably.

Mr. Speaker: It might help but I doubt whether it would be in order.

Mr. Hordern: I am sure that I should be completely out of order if I attempted to get to the bottom of the point of that intervention, in view of the internecine strife among Members of the party opposite, so I had better not try.
The size of the taxation proposals have not all been caused by the international situation, grave as it has been recently, and I would remind the House that that situation was triggered off by devaluation and that the responsibility for devaluation lies entirely on the shoulders of the Government.
The taxation proposals in this Budget would not have been necessarily so large had the Chancellor not left his action so late. I recall that in the course of the debate on the Letter of Intent the right hon. Gentleman said that he did not want to dig a hole and leave it empty. What we have now is an enormous chasm. He made that remark on 5th December, and we had to wait until 16th January and the so-called cuts in public expenditure before any further action was taken.
As the House knows, those alleged cuts amounted to £300 million of projected future growth in expenditure for the year 1968–69. Then came the Vote on Account which showed a rise of a further £1,000 million, or some 10 per cent. in all. Therefore, the Chancellor must bear the responsibility for not applying the regulator, if not immediately after devaluation, certainly at the time of the cuts in public expenditure.
Everybody has experienced the rush on shops and stores for goods and hardware of all kinds. It was clearly the delay in applying the regulator which made the size of the taxation increases so great. It must have been clear to the Chancellor earlier in the year that not only was the balance of trade the worst ever, but that the balance of payments deficit would also be extremely severe. The balance of payments deficit last year amount to £540 million. It is interesting to note that had the level of private investment abroad and the level of private investment from overseas in this country remained the same as in 1964, the deficit last year would have amounted to £825 million. I hope, therefore, that in future we shall

hear no more nonsense about the so-called deficit which they inherited. The taxation proposals have had to be so severe because the Chancellor left it too late to apply the regulator.
Now we have to consider the effect of these proposals. In my view, there is a grave danger that they could cripple any chance of an early recovery. I see from the new form of accounts, which include, for the first time, the Economic Forecast, which I welcome very much, that the Government are expecting industry to increase its investment this year by 7 per cent. At page 35 of the Financial Statement, the Economic Forecast says:
The growth of exports and investment this year will probably lead to a fast expansion in manufacturing output. For this reason manufacturing investment is expected to go on rising quickly during 1969 …
I find this very difficult to believe. Those who have contacts with the engineering industry, and particularly the machine tool industry, will know that that industry's order books are at their lowest level for twelve years. There is no evidence of an upturn in orders, as opposed to the rather vague generalisations about investment intentions, and there is no evidence of an upturn in investment in the engineering industry. Therefore, the measures against the motor industry—the Excise licence, Purchase Tax and petrol tax—may very well come at a time when the motor industry was gearing itself up for further investment but might now pause in doing so. Were that to be the case, there would be grave danger of a slowing up in production and a growing unemployment level later in the year.
In these circumstances, a statutory prices and incomes policy is a gratuitous insult. It is the last refuge of a Government which has failed to control demand, failed to control their own expenditure, failed to get higher investment and failed to get growth. In all these features the Government have failed.
It does not need me—I am certain we shall have further opportunities in discussion on the Finance Bill—to show how unnecessary such a Bill will be. If there are to be deflationary actions as a result of this Budget, no prices and incomes policy will be necessary.
I was astonished at the reaction of Government supporters yesterday to the imposition of a further £920 million extra


taxation. I doubt whether their constituents will be so pleased. The more enterprising of them have already expressed their dissatisfaction by voting with their feet. I am certain that, whenever the next election should come, hon. Gentlemen opposite will be feeling the wind of change. As it is, what have they got to look forward to? Always in front of them they have the spectre of being in Opposition again. What will they be doing? Will those few who will be here be voting against tax increases, against prescription charges or an incomes policy if, for some horrible reason, it should still be in existence. What will be their function? They know now that their prospects are completely finished, whether before or after the next election. In the meantime, the country has to pay for three and a half years of absolutely disastrous government.

7.15 p.m.

Mr. Alfred Morris: I should like to preface what I have to say with a reference to the speech of the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod). It was an utterly remarkable, indeed historic, speech. It made history because it visibly closed the eyes of so many right hon. and hon. Gentlemen opposite. Perhaps even the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), who is now representing the Opposition on the Front Bench, will agree that there never was a less effective speech. It clearly caused much anguish, as well as inducing sleep, among hon. Gentlemen sitting behind the right hon. Member for Enfield, West. But they may well have awakened in anger had the right hon. Gentleman spelled out exactly what would be involved in the introduction of a tax on value added. It will be recalled that he expressed some sympathy for this form of taxation, and there is support on both sides of the House for the proposition that we should consider replacing Purchase Tax with a tax on value added.
I feel we should recall in this debate that the former Financial Secretary to the Treasury pointed out that it would take four to five times as many tax officers to collect by a tax on value added the same amount of money as we now collect by Purchase Tax. My hon. Friend's prede

cessor also emphasised that it would be four to five times as costly to collect by a tax on value added what is now collected through Purchase Tax.
This is all the more important since in debate after debate, right hon. and hon. Gentlemen opposite have criticised the numbers of civil servants we employ. They must, of course, be consistent, and I should have thought they have a lot to explain to their supporters if they insist that Purchase Tax should be replaced by a tax on value added.
Moreover I should have thought that the right hon. Gentleman, while he was criticising public expenditure, might have spelled out in more detail how much his partys pledges on continued military commitments east of Suez would increase public expenditure. The right hon. Gentleman's speech was contradictory where it was not negative and as inconsequential as it was visibly boring to those sitting behind him.
As I have shown, hon. Members who speak for the Opposition must be far more consistent than they have been so far. One hon. Gentleman opposite has referred to over-consumption as the British disease. Yet he was attacking a Budget which provides for very heavy taxation on consumption. A tax on value added would mean a great increase in tax on consumption. It has been said by a former Director of the National Economic Development Council that a tax on value added is nothing if it is not a tax on consumption. The manufacturer passes the tax on to the retailer, and the retailer passes it on to the consumer. But the consumer cannot recoup it or pass it on. Thus a tax on value added is classically a tax on consumption. It would have the most unfortunate effects for those on lower incomes. I ask my hon. Friend, who is an expert in these matters, to tell the Opposition that they cannot at one and the same time attack bureaucracy and taxes on consumption and yet advocate a tax on value added.
I think that we ought also to remind the Opposition of an almost unregarded speech by the right hon. Member for Grantham (Mr. Godber) recently when he was talking about import levies. He said, in extenuation of these, that they would add only 2 per cent. to the cost of living. But if the Opposititon believe


in a dear food policy, let them spell out in this debate exactly what it would mean to the great majority of working people. If they want vastly to extend indirect taxation, they ought not to be criticising the Budget in the way that they have tried to do.
I am pleased about certain proposals in the Budget. I have taken a particular interest in the tax avoidance industry. We know that throughout the 'fifties, and. indeed, more recently, this has unfortunately, been a growth industry. I have been particularly concerned about the extent to which parents have been able to use the industry in finding the fees for their children to attend public schools. For the most part, they have done this by taking out big life assurance policies. I was interested to learn that £70 million is given by way of Income Tax relief on life assurance policies, as well as £15 million by way of tax relief on bank interest. There is no doubt at all that the majority of parents who send their children to independent fee-paying schools are not doing so out of current income. The arrangement whereby a person earning £10,000 a year can spend more on life assurance in a year than the average manual worker receives in wages is a bad system. And I am pleased that a start has been made in distinguishing between genuine life assurance from the rest. I hope that we shall see this activity taken very much further in future Budgets.
I am also pleased, as I know many of my hon. Friends are, about the new provisions for taxing unearned income. I saw the anguish and anger on the faces of some hon. Gentlemen opposite. Indeed, I saw one hon. Gentleman mouthing the word "robber" when my right hon. Friend the Chancellor got to that part of his speech which dealt with the taxing of unearned income. If there is any criticism of that part of the Budget Speech from this side of the House, it is the constructive suggestion that taxation of unearned income should be carried much further in future Budgets.
As has been said by a number of my hon. Friends, equity is extremely important and especially so in prices and incomes policy. We cannot expect automatic respect for authority. People want equity more than almost anything else, and they want to see a much more

dramatic redistribution of wealth than they have seen so far during the lifetime of this Labour Government.
There are other points in the Budget which have been welcomed by this side of the House and which will be welcomed by most people in the country because they attempt to introduce greater equity than we have seen before. But with the increase in taxation on consumption many people will be concerned to ensure that further help is given to those who live on earnings below the average. I realise that there is to be an increase in supplementary benefits later this year, that rate rebates are being improved and that family allowances are to be further increased. These are all welcome steps, but we must be very careful to ensure that we do not increase the hardships of families who live on incomes below the average and particularly the children of families in that category.
There is a growing tendency for people to say that indirect taxation is far better than direct taxation. I think the argument on the other side has gone somewhat by default so far in this debate. If someone spends on goods and services only a small part of a large income, clearly he will welcome indirect taxation. But there are those, and they are many, who spend all of a small income on goods and services and who are, therefore, badly affected by a policy which is biased in favour of indirect taxation. It is for this reason, and not for any doctrinaire reason, that I oppose the tax on value added.
I entirely concede that for certain of the E.E.C. countries a tax on value added to replace their present cascade system is an improvement for them, but for us to displace Purchase Tax by a tax on value added would be a retrograde step. It would be a tax on food. We ought to attack some of the prejudices which hold direct taxation to be bad and indirect taxation to be good. The Chancellor said that he wanted to be very discriminating and avoid the more regressive forms of indirect taxation. But any tax on food is, by definition of the term, extremely regressive.
There will be serious disquiet among consumers organisations about the increase of 50 per cent. in the Selective Employment Tax. My hon. Friend the Member for Willesden, West (Mr. Pavitt)


last night made a powerful speech against the tax, and I hope that my right hon. Friend the Chief Secretary, who is here, will listen carefully to such organisations as the Co-operative Movement when they criticise, as they undoubtedly will, this further extension of indirect taxation.
The Co-operative Movement will argue, as it has before, and as I have done, that the standard industrial classification is not the right method for deciding who shall pay. I am sure that my right hon. Friend will agree that there is likely to be extreme concern in most of the service industries and will appreciate that the Co-operative Movement is studying with great anxiety the effects of this new increase in indirect taxation. I hope it will also be recognised that the Cooperative Movement is criticising from the viewpoint of an organisation which is about to carry through a vast programme of modernisation. The Movement's viewpoint is worthy of every respect.
The Chancellor did well to refer to trade policy. I was greatly impressed by a statement yesterday by Sir George Bolton, the Chairman of the Bank of London and South America, in which he said:
There seems to have been among all our political parties an acceptance of the fatalistic attitude that Britain can survive only as part of a West European system; it seems to have been assumed that, if the attempt to join Europe fails, then no alternative trade policy is worth looking at and the country must accept economic and political oblivion. There is no evidence to prove that this assumption really reflects the opinion of the British people, and its unquestioning acceptance by most politicians is symptomatic of the growing gulf between them and the people.
We must accept that the Common Market's door has been banged in Britain's face for the second time, and we cannot wait about hoping for some magic to open it.
I hope that we shall look to a wider International Free Trade Area, of the kind discussed recently at the important conference in New York attended by my right hon. Friend the Member for Battersea, North (Mr. Jay), Mr. Frank Cousins and hon. Members from both sides of the House, and that Britain will be seen to be initiating events instead of reacting to them. We should not take the fatalistic attitude which Sir George Bolton described so well, but should say that this

country is an important trading nation which deserves to prosper and is determined to do so.

7.35 p.m.

Mr. Ian MacArthur: There have been repeated tributes in the debate to the Chancellor for his speech yesterday. I am afraid that I cannot join wholeheartedly in those congratulations, except so far as they relate to the length of his speech and the manner of the earlier part, in which he said some disagreeable things in a most agreeable way. To go beyond that would make the congratulations stick in my throat, because there is nothing praiseworthy about the circumstances in which the Chancellor has decided to raise an additional £923 million of taxation from our long-suffering people, or in the fact that this Government have increased the annual rate of taxation by £1,800,000 for every day since they took office in 1964.
This enormous increase followed the pledge by the Prime Minister and many other hon. Gentlemen opposite, no doubt. in the 1964 election that there would be no general increase in taxation. Since then, of course, we have learned by bitter experience that any statement by the Prime Minister is an assurance that the opposite will happen.
It was interesting to read that the Chancellor yesterday said:
In the wake of devaluation, some price increases are inevitable …"—
and spoke about
… prices rising faster than usual on account of devaluation …"—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 264, 260.]
and to contrast that with the statement on television by the Prime Minister last November that "the pound in your pocket will not be devalued". I wonder whether the Prime Minister will ever have the nerve to appear on television again—

Mr. Diamond: The hon. Gentleman has it wrong.

Mr. MacArthur: They may not have been the exact words, but that was precisely the sense of what the Prime Minister said.

Mr. Diamond: I am sorry to rise to this old bait again, but the hon. Gentleman knows that the essence of what the


Prime Minister was saying is that he was referring to the present, to the time of which he spoke; he did not refer to the future. The hon. Gentleman has deliberately turned the phrase around.

Mr. MacArthur: The right hon. Gentleman may quibble about the exact words, but he knows perfectly well that the sense of what the Prime Minister said and intended to convey was that the cost of living would not be affected by devaluation. If that was not his intention, then the gulf between what the Prime Minister says and what he thinks gets wider and wider every week.
I recognise that the Chancellor believes that this is a difficult year in which to make forecasts, and I sympathise with his difficulties, but there are one or two aspects of his forecasting yesterday on which I would like some guidance. For example, many of his forecasts were based on the rate of consumer expenditure over the last year. I wonder whether he allowed for the fact that in the latter part of the year we went through an unusual consumer spending boom. In other words, how reliable is the basis of his forecast?
The end of the Chancellor's speech yesterday was quite disgraceful. It was addressed to his Left wing and was an attempt to obscure the gravity of the new statutory powers which are to be introduced by the smokescreen of his cynical attack on the wealthy. But nothing could obscure the fact that what hung over the whole of his speech was the shadow of Washington and Zurich.
I cannot understand why he waited until yesterday to make his Purchase Tax changes, since it was clear several months ago that consumer expenditure would have to be restrained. Apart from tinkering with hire purchase, nothing was done. He can hardly have been surprised that consumer spending boomed ahead over the last few months, since the Government invited it themselves: their repeated statements about the horrors to come made the spending spree inescapable. Now, Purchase Tax has gone up sharply. The highest rate has been nearly doubled, and it now goes far beyond the fur coats which headed the right hon. Gentleman's list yesterday. Now subject to 50 per cent. are teenagers' "pop" records and tape recorders, the family

holiday camera, the man's hair cream, the woman's hair spray and lipstick. Other Purchase Tax increases hit every aspect of family life.
I hope that the Chancellor will modify some of his other proposals at a later stage. Reference has been made to so-called tax avoidance insurance policies. I appreciate that the Chancellor proposes to extinguish the benefits which these have provided in the past, and without at this stage arguing the principle of these policies, there appears to be a retrospective element in one of his proposals, to which I hope the Chief Secretary will refer.
I understand that one form of insurance policy will no longer attract the substantial relief of the past. Although one might argue about the wrongs or rights of that policy, the Chancellor's proposal is not retrospective in this case. However, other insurance policies mentioned in the Financial Statement and referred to in the right hon. Gentleman's speech appear to be subject to retrospective legislation. I have in mind, for example, policies taken out under the married women's property legislation. These were taken out by many people acting in good faith. They arranged their affairs to take advantage of the law as it stood. I trust that it is not the Government's intention to affect those policies retrospectively. I am alarmed because it is stated on page 5 of the Financial Statement:
The above changes will apply in the case of deaths after 19th March, 1968.
There could, therefore, be a substantial loss to people who in good faith adjusted their affairs through insurance policies of this kind some years ago. I trust that there will not be retrospection for existing policies.
Another element in the Budget to which I object is the mean little proposal about children. It is monstrous that the Government should now propose to treat children's incomes as part of their fathers' incomes. I am thinking not of the millionaire's child—whom the Chancellor is anxious to chase—but the child of a family of modest or fairly well-to-do means who has been given, say, a christening present of unit trust shares which often, if held in trust, carry not a dividend income but the issue of a few units every year in lieu of cash. Is the father of such a child to pay tax on this


small income at his highest rate? Is there not to be some limit below which this new imposition will not apply?
Another mean proposal is that affecting young couples. It is unnecessary for the Chancellor to extinguish the benefit which previously accrued to a young couple married towards the end of the financial year. At a time when young people are going through one of the most expensive periods of their lives and at a time when the tax relief which has accrued to them has been of real benefit, this new impost should not have been introduced.

Mr. J. Bruce-Gardyne: Is my hon. Friend aware that these young couples will, in addition, be severely hit by the huge increases in Purchase Tax?

Mr. MacArthur: Certainly. I am much obliged to my hon. Friend for making that point.
What will be the impact of the Budget on life in Scotland? I could hardly believe my ears, after all the debates we had had in recent months, when I heard the Chancellor say that the whisky duty was to go up yet again. I cannot comprehend why the Government do not follow the advice which has been so wisely given on many occasions by my hon. Friends and myself to separate whisky from the spirit duty heading. The Chancellor knows that home consumption of whisky has been falling, that the yield may also shortly fall and that by assaulting whisky in this way he is inviting foreign chancellors to increase the rates of duty abroad as well. Every time we increase the duty on whisky here foreign Governments follow our lead and do the same. I cannot understand why this unnecessary additional impost has been forced on the whisky trade at a time when its sales at home have declined under the pressure of repeated additional taxation levied by this Government.
Even more serious than that is the impact on Scotland of the additional 4d. duty on petrol and the severe increase in motor vehicle and goods vehicle licences. Petrol and vehicle duty hits the Scot harder than the Englishman. I do not say that in a nationalistic sense but to call attention to the fact that we in Scotland rely more on transport than do the

constituents of, say, the Chancellor. We must transport our goods over greater distances. Road haulage costs, bus fares and so on are related to these duties, and this element is more important to Scottish life than it is to life south of the Border. I urge the right hon. Gentleman to reconsider this proposal. I can see no reason why there should not be a differential rate of duty for Scotland. There are, no doubt, splendid Treasury arguments against such a course, but with good will and common sense it would be possible to ease the burden on Scotland and honour the Government's word—repeatedly given but rarely kept—to protect the development areas from measures of this kind.
The vehicle licence goes far beyond private cars. The new rate of licence duty on a 10-ton lorry will, from today, be £459. That will have to be paid before the vehicle is even on the road. Can the right hon. Gentleman imagine the effect that that will have on transport costs and the cost of living generally in Scotland and remote areas?

Mr. Leslie Spriggs: The hon. Gentleman is arguing against indirect taxation. Would he agree that direct taxation acts more fairly on the poorer sections of the community?

Mr. MacArthur: I will not argue that point now. I am calling attention to the fact that the cost of running goods vehicles has soared since yesterday's announcement and that this must have a direct effect on the cost of living of ordinary people. I am sure that even the hon. Member for St. Helens (Mr. Spriggs) would want to see that burden eased.
The Chancellor made great play of the fact that because of this additional impost the two new taxes introduced in the Transport Bill would be removed. I am delighted that the Minister of Transport has been put to flight to some extent, but I hope that the public will not take this to mean that the Bill has been extinguished. It is still very much alive. It is still a dreadful Measure, and although two heads have been lopped off that Medusa, there are others growing there too. I hope that the Bill will be extinguished altogether before long.
More than half the people who work in Scotland work in the service industries,


and all of them, with few exceptions—I will come to them later—will, under the new S.E.T. arrangements, be taxed at the new rate, which is increased by 50 per cent. I will not go over the arguments against this tax because they are unchanged. The Chancellor must recognise the hardship which this will bring to the rural areas and those parts of Scotland outside the industrialised central belt. The cost of this tax bears heavily on development in those areas, it is an added pressure on the cost of living and an additional hardship which the housewife must face from this point on.
I fail to understand why the Government persist in this discrimination against the service industries. Not long ago we had a White Paper—it was produced with a fanfare of trumpets and was known as "The Scottish Plan"—in which tribute was paid to the service industries, to the rôle that they had played in the Scottish economy and to the coming increase in that rôle. The larger part of the increase in new jobs in coming years was to be in the service industries, yet a few months later we had this dreadful tax slapped on them. I suppose this reflects Socialists' opposition to the whole process of distribution, selling and servicing, which somehow they regard as disreputable. This is a form of discrimination I utterly fail to understand.
The exception to which I refer is the relief which will be provided for rural hotels. From what the Chancellor said yesterday—which was elaborated slightly, but only slightly, by the President of the Board of Trade this afternoon—I understand that rural hotels in development areas which have four letting rooms or more, with an important qualification, from September next are to have Selective Employment Tax refunded to them in full. This I welcome. It certainly will be a help to those hotels.
I want to know, and I should like to know today, which hotels will be affected. I tried to intervene during the President's speech and I was surprised that he did not give way on this point. He decided not to give way four or five times running. I have been informed by the Scottish Tourist Board this afternoon that it has received many telephone calls from hotels in the country in Scotland anxiously inquiring if they will receive this benefit or not. Why did the President not give

us more information? It is not good enough to say that this will be spelled out in the Finance Bill. We want to know now. It is important for the hotel industry to know now. They will soon be entering the holiday season, they want to know what their commitments will be, what staffs they can afford, and what charges they should make. They cannot go ahead properly with their necessary commercial operations until they have the information.
I referred to a qualification. It appears in the Financial Statement. It was also in the Chancellor's speech yesterday, but I did not hear it repeated in the speech of the President of the Board of Trade. I hope that we shall have some explanation of this later. The President referred to rural hotels in development areas. The Chancellor and the Financial Statement referred to,
hotels in certain rural parts of development areas."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 286.]
What does that qualification mean? What are "certain rural parts"? I hope that we may have an explanation. I trust that it is not the intention of the Government to use this in an unfair way to restrict the advantage to the seven crofting counties in Scotland. I have an awful fear that that may be the intention. If so it would be monstrously unfair.
There are only 473 hotels and boarding houses in the crofting counties compared with 1,901 outside those counties. Is a "rural area" not to be what every layman would refer to as a rural area—an area of the countryside? Will the Government tell us where the country stops and the town starts? If the Chief Secretary would care to accompany me on a quick trip to my constituency, perhaps he could tell me if the centre of Perth would be a rural area or not. But all around it there is a rural area. Does that start immediately one crosses the bridge over the River Tay? Is one side in the town, and the other in the country? At what point does one enter a "certain rural part"? The right hon. Gentleman will recognise that this has caused confusion and the hotel industry is anxiously looking for guidance. I expect a reply to be given on this point tonight.
I hope the Government recognise that we shall feel that they are cheating if the net result of all this is that the tourist industry in Scotland will pay more in S.E.T. than in the past. I understand that the cost to the industry has been about £1 million a year. If the "certain rural part" hotels are to be only a small minority, the remainder will be paying S.E.T. at the increased rate and the total bled from the industry could be even larger than it was last year.
I regret very much that the Chancellor has not taken this opportunity to get rid of some of the anomalies with which the Selective Employment Tax structure is riddled. I was glad to hear the President of the Board of Trade make reference to the growing importance of marketing in industry. In this I declare a personal interest. I ask the right hon. Gentleman to consider whether there is not a strong case for an S.E.T. rebate, or indeed a premium, in respect of those people working in marketing and advertising firms in Britain who are actively engaged for a large part, or for the whole, of their time in the development of export markets for British manufacturers and the promotion of British goods abroad. Surely there should be a refund or a premium in respect of these people.
On another point—and here I withdraw from the field of personal interest—I remind the right hon. Gentleman that even in the computer industry there is an area in which Selective Employment Tax has to be paid, for example, in the data processing centre attached to a manufacturing industry producing computers but physically separated from the manufacturing plant. There is one such in Dundee. Computer operators, systems analysts and the like believed that the Labour Government would lead them into the technological revolution, but now they find they are subject to this tax. This is another anomaly which should be removed.
The President of the Board of Trade said that there was a new confidence in industry. He cannot have read the comments on the Budget by the C.B.I. reported today in Scotland. It is quite clear that there is nothing in the Budget to encourage the qualities we need in our national life. There is nothing to encourage investment and the growth that we need so urgently, nothing to restore

the confidence of the individual or to give our people the hope and purpose which national recovery requires.

7.58 p.m.

Mr. W. A. Wilkins: I first wish to put the minds of my hon. Friends at rest by saying that I shall speak for only a few minutes. I wish to say a few things which have come to my mind as I have listened to the debate. One of the disadvantages of not coming with a prepared speech or thoughts in one's breast is that one is provoked by what is said by hon. Members opposite. Somehow or other the hon. Member for Louth (Sir C. Osborne) always seems to provoke me into wanting to speak. Then he disappears from the Chamber and is not present to listen to observations made on his speech.
If ever there were a prophet of doom he surely is the hon. Member for Louth. This afternoon he was completely destructively critical, but he did not offer a single suggestion as to where the Government had gone wrong and how they could put it right. We and the Press have been saying for some weeks that we were to expect a tough Budget. Everyone in this House expected a tough Budget and most people in the country expected it. That is exactly what we have got.
I have been in politics for over 40 years and in my time in the House no Chancellor of the Exchequer since Sir Stafford Cripps has faced up to the economic responsibilities which the Treasury has undertaken, at least in the last 15 years. I partly exonerate the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and the other ex-Chancellor who now wears a coronet in the other place. They both wanted to take drastic action to restore the country's economic equilibrium, but they got the sack.
When the gentleman who now sits in another place departed from the Treasury, accompanied by his two ministerial colleagues, we heard such expressions as, "Nigel is very worried". I thought about this earlier when there was reference to the slithering process, because those were the very words used by that ex-Chancellor of the Exchequer. He said that the country was slithering from one crisis to another, that he wanted to take the action


necessary to stop it, and that, if he had been allowed to take it, the country would not now be in the position that it is in. Those were the words used by the Tory ex-Chancellor who had to quit his job.
In view of that, we have the right to say that this is the first real attempt to get the country on a sound economic base. The people have at last begun to realise that this is necessary. The comments appearing in tonight's London evening papers seem to indicate that over a fairly wide cross-section the community has accepted the necessity for this.
The hon. Member for Twickenham (Mr. Gresham Cooke) went back over the past three years and cited the adverse balance of trade figures. He conveniently forgot to go back to 1964, when the Tories left us a deficit of £800 million. He could gave gone back much further. He said that Britain had had only' Three favourable balances of trade. My information is that we have had only two favourable balances of trade, excluding income from invisible sources, since 1822 on the fiscal exchange of goods and services.
I usually take part in the debate on the Budget Resolution when a Chancellor has put a further impost on tobacco. I do not quarrel with what the Chancellor has done in this connection this year, because I believe that over the wide span of my right hon. Friend's taxation proposals he has imposed the taxes with as much fairness as it is possible to achieve. I hope that this will be accepted by those of my constituents who work in tobacco factories in Bristol. Whenever a Chancellor increases the duty on tobacco, they become concerned that employment will be adversely affected and that there will be redundancy. However, this never seems to happen. Indeed, if anything, more staff have to be engaged.
I am critical of one proposition made by my right hon. Frined yesterday and to which I have heard no reference. That does not mean that there has been no reference to it. It means only that someone may have mentioned it whilst I have been temporarily out of the Chamber. I believe that we are plumbing the depths when we seek to raise revenue by such means as Premium Bonds and lotteries. I spoke against Mr. Harold Macmillan's proposal in relation to Premium Bonds.

That proposal appeared in the only Budget Mr. Macmillan introduced.
The words I then used, rather emotionally, were not eclipsed by the words then used by my right hon. Friend the Prime Minister, who described the Premium Bond proposal as a squalid raffle in "the casino society" and said that we were creating "the windfall State". If the broad base of British workers suffers from any malaise, it is that in the last 15 or 20 years we have inculcated into the minds of the people the feeling that there is a way of obtaining income or a living without working for it. The whole idea of speculation is to make people think that if they put 2s. in this or 2s. 6d. on that they stand to win £25,000, which is the prize my right hon. Friend proposes to make available each week in the Premium Bond scheme. The view is taken that because of the gambling instinct which so many people have they will fall for this and the Exchequer will get a lot of money.
It is a sorry day when Great Britain—I place emphasis on the "Great"—has to rely on income from lotteries and gambling. If I had had the time, I would have researched the figures for gambling. Only a week or two ago I met someone who goes to bingo every Saturday night. When asked how much he expected to spend, he told me it was almost 30s. It is people such as that who will start shouting and squealing when it comes to paying the increases that will probably take place either as a result of devaluation or as a result of the impositions made in the Budget. I hope that the Chancellor will have second thoughts about this proposition.
I believe that there is already evidence that the public, having been prepared for a tough Budget, have, generally speaking, given approval to these proposals. However, I believe that it is unfair—I do not believe that that is too strong a word—to hit the motorist again in this way. Many working-class men gang together and buy a car to get them to their work. Many of my constituents do this so that they can get from one side of the city to another. This saves them transport costs and a good deal of time.
It is a bit rough to hit them three times. Purchase Tax is to be increased. They are hit again on petrol and oil.


Then, the price of the Road Fund Licence is to be increased from £17 10s. to £25. This may be a small thing to the Chancellor, but it is very important to some people. I ask the Chancellor to think about this again and consider compromising by making the licence fee £20, because £25 is a little steep and is unfair.

8.10 p.m.

Mr. J. Bruce-Gardyne: I hope that the hon. Member for Bristol, South (Mr. Wilkins) will forgive me if I do not follow him far along the line which he took. We have heard already about the Prime Minister's views on a national lottery, and we look forward to seeing the way he votes when that proposal comes forward. Perhaps he will find a reason for being absent.

Mr. Wilkins: rose—

Mr. Bruce-Gardyne: Will the hon. Gentleman forgive me? Time is getting on.
It strikes me that the Budget has much of the touch of the present Chancellor about it. It is a clever Budget. It is a meretricious Budget. I suspect that it is also a dangerously cautious Budget.
I say that it is a meretricious Budget because the Chancellor has dressed up his figures. The figure of over £900 million is substantially in excess of the real reduction in demand which he intends to make because so many of the figures have been puffed up. He includes the capital levy—for that is what it is—on large invested fortunes, but that has nothing to do with the curtailment of home demand. The yield from the increase in Purchase Tax has been inflated because the Chancellor has given the gross figures without allowing for the drop in demand which is bound to follow the enormous Government-induced spending spree which preceded the Budget and without allowing for the effect of the additional taxation in discouraging demand for the goods to which it is applied. This is true of the duty on spirits, Scotch whisky in particular. As my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur) said, the increase in the duty on whisky is more likely to produce a decline in revenue than an increase.
However, I do not greatly mind that the Chancellor has swollen his figures. Indeed, it was a sensible exercise on this occasion. We needed to impress the world and, if we impress the world rather more than we really depress our own economy, it is probably a fault on the right side. What I criticise is that the real curtailment of demand which the Chancellor is imposing, which, I understand, the Treasury puts at about £550 million in the current year, may be dangerously on the high side. Unfortunately, the Chancellor had no choice but to err on the side of caution, and no one but himself was to blame for that. Admittedly, he did not choose the timing of devaluation. In my view, if devaluation is to have the chance to work successfully, it should be applied when an economy is turning down, and it should be accompanied by trade liberalisation.
In fact, the timing of devaluation was all wrong, but that was the fault of the previous Chancellor and the Prime Minister. But it is inexcusable that the Chancellor himself sat back for four months before trying to create conditions which could make devaluation work. The Prime Minister, at least, has been consistent about it. He never believed in devaluation. He always said that it was a soft option, and when it came he presented it as a soft option. But the Chancellor believed in devaluation, yet by his criminal dilatoriness he has jeopardised the whole operation already. That is my first and major criticism against his strategy—his dilatoriness in applying the reductions to home demand.
The second major criticism is that the right hon. Gentleman totally disregarded the advice of our international creditors in one respect, in that they urged him to reduce demand at home by cutting public expenditure and not by relying on increases in taxation. He has done precisely the opposite. I get rather tired when hon. Members opposite constantly tell us that there have been severe cuts in Government expenditure. There have been none. On the contrary, there has been only a modest reduction in the rate of increase in the level of Government expenditure.
It is worth recalling that, when the so-called cuts in public spending were announced in January, the Chancellor's


calculations, apparently, were based on a 4 per cent. rate of growth in the current year. As my hon. Friend the Member for Horsham (Mr. Hordern) pointed out, the rate has now been reduced by the Chancellor to 3 per cent. in response to the instructions of the O.E.C.D., but there has been no corresponding reduction in the rata of advance in public spending. Hence, what with dilatoriness and a failure to deal effectively with the problem of soaring public spending, the Chancellor probably had no choice but to err in his Budget on the side of caution and to take serious risks.
I shall come to those risks in a moment, but first I wish to discuss one or two details of the Budget proposals. The increase in the duty on spirits, and on Scotch whisky in particular, is a piece of sheer folly. It will not increase revenue. It is likely to reduce it. [Interruption.] If the Financial Secretary does not realise that the revenue from this tax has been stagnating already since the last increase in the duty, he ought to look up the figures. Consumption at home has been declining, stocks are increasing, and the industry—probably our second largest earner of foreign exchange—is in a dangerous and vulnerable position already. It is the height of irresponsibility to increase the impost further.
My hon. Friend the Member for Perth and East Perthshire spoke of the serious effect which the big increase in Selective Employment Tax is bound to have on areas like Scotland where service industries are comparatively more important than they are in England. I hope that the Financial Secretary will give us a clear answer on one aspect of this question, and tell us which are to be regarded as rural hotels and which are not. I foresee endless confusion. I am horrified by the idea that a hotel in, say Arbroath in my constituency will face a 50 per cent. additional impost in its S.E.T. bill while another 15 miles away, perhaps on the other side of my constituency, will suddenly find that it does not pay the S.E.T. at all. This will distort the whole pattern of competition between them. The sooner the proposal is spelt out clearly the better.
I was shattered to hear the President of the Board of Trade talk today of the Government's success in bringing more

people into employment. He applied that observation to Scotland in particular. As President of the Board of Trade, he ought to know that the number of persons in employment in Scotland, the relevant statistic here, was, at the latest count, substantially below the number when this Government took office. I just do not understand how anyone can say that that represents bringing more people into employment.
The President of the Board of Trade said, also, that the contrast in unemployment rates between different regions had begun to narrow. Here, I think, he was on a better point. But why had it began to narrow? It had begun to narrow because the levels of unemployment in the South-East and the Midlands of England have been rising. In other words, this is a classic example of Socialist philosophy in action—levelling down all the time. That is how the only improvement has been achieved, an improvement in relative levels of unemployment between different parts of the country as a result of a general worsening.
Now, a word about the international context in which we must view the Budget. We all recognise the importance of the international background to it.
I have just returned from the United States, and a profoundly depressing prospect I found there. The President of the Board of Trade said today that there was now an obligation upon the reserve currency countries to put their houses in order. I do not think that the only obligations are on the so-called reserve currency countries. The Federal Republic of Germany has a very considerable international obligation as well, as a major creditor country. The way in which the Federal Republic has so far observed that responsibility leaves a very great deal to be desired. I was very sorry that in answer to a Question of mine a month ago the Chancellor discounted the possibility of reminding the Germans, at the very least, of the rules of the I.M.F. and the possibility of declaring the Deutschmark a scarce currency under those rules. There is certainly an obligation on a major and persistent creditor country, just as there is on a major and persistent debtor country.
Nevertheless, it is clear that there is a major obligation on the two so-called reserve currency countries, and it may


be that with this Budget the Chancellor of the Exchequer has fulfilled our side of it. But I am very doubtful from what I saw in the United States whether the President will be in a position to fulfil his part in the process of putting the house of the United States in order. I understand that the United States Administration regards the Vietnam war as a prior charge on the American economy. But many of those who are most influential in the consideration of fiscal and monetary policy on Capitol Hill seem to believe that the Vietnam war is the main cause of the haemorrhage of their balance of payments, and that to tackle other aspects of the balance of payments problem is as sensible as applying a tourniquet to the arm when one is bleeding to death from the leg.
If it is true that the President will run into difficulties or even deadlock in trying to apply his promises of budgetary deflation in the United States, the prospects for the new split-level gold market arrangements working for very long are clearly pretty remote. No doubt the Financial Secretary will have studied the remarks of President de Gaulle this afternoon on the subject. I feel that in due course perhaps the only reform we are now likely to obtain is a change in the price of gold. It is all very fine to say that that is a cave man solution. It is high time the Home Secretary, the former Chancellor of the Exchequer, realised that cave man solutions are better than no solutions at all.
But, if the President does succeed in obtaining the Budgetary restraints which he has now called for, it seems to me that we face a potentially dangerous situation. If we are having a massive deflation applied to the British economy by the Budget and at the same time a very substantial measure of deflation is applied to the American economy—and it would take a very substantial measure of budgetary deflation to affect the American balance of payments—there is a real danger of a multiplier factor being applied internationally in a deflationary sense. I understand that the Chancellor is basing his calculations in the Budget on the expectation that a large rise in exports will fill in the hole in the home economy which the Budget will create. Shall we get that large rise in exports?

We shall not if the United States Government fulfil the sort of pledges they gave to the international bankers last weekend. Therefore, whichever way it goes, there are most ominous and threatening clouds in front of us.
Here perhaps I may strike a chord of sympathy with hon. Gentlemen opposite. I sometimes feel that in our anxiety—by "our" I mean the United States just as much as the United Kingdom—to hold the line against international Communism we may have placed such a strain on the balance of payments of both countries, as to threaten the collapse of the whole financial system on which international trade is based. While I recognise, as all of us should, the very real risks involved in withdrawal from the Far East, whether by us or the United States, it seems to me that the risks to ourselves and the advantages to Communism which would result from a collapse of the financial backing for world trade would be infinitely more severe than the risks to ourselves and the advantages to Communism which might be involved in our withdrawal. It is time we thought about that very carefully.
To my mind this is a horrific Budget. We heard a certain amount from the President of the Board of Trade today about how the Government were asking the people of this country to make a very modest sacrifice of 1 per cent. in their standard of living. But the Chancellor reminded us in his broadcast last night that since the Government came to power the standard of living of the people had already dropped below the levels of our friends and neighbours in France and Germany. This is an additional sacrifice being imposed on the people after three years of continuous sacrifice without any sense of direction from the Front Bench opposite. There is really a time when right hon. Gentlemen on that Front Bench are called upon to make a sacrifice, and the best one that they can make is of themselves.

8.27 p.m.

Mr. John Cronin: The hon. Member for South Angus (Mr. Bruce Gardyne) made a very interesting and enlightened speech, though I do not agree with his peroration. I was very glad that on the whole he avoided the rather tedious forms of political attack which


we have heard several times on the causation of the present economic crisis. The Leader of the Opposition was a particular offender in that respect yesterday afternoon.
The plain fact is that the crisis has not been brought about by three years of Labour Government or 13 years of Conservative Government. As we have had crisis after crisis ever since the last war, it is obviously not due to any particular political party. Both the previous Conservative Governments and the present Government have not been as successful as they should have been in coping with the situation. Therefore, nothing could be more idle than the remarks of the Leader of the Opposition yesterday. But I do not want to drive that point too far, because, whatever difficulties we have on this side of the House, our great consolation is that there is always the Leader of the Opposition on the other side.
I hope that my hon. Friend the Financial Secretary will convey to my right hon. Friend the Chancellor of the Exchequer my congratulations on his political courage in composing the Budget and on the excellent way in which he presented it not only in the House but on television yesterday. Nothing is more helpful than to present our difficulties in a candid and simple way and to indicate the solution. My right hon. Friend's total abstention from soft soap salesmanship and any kind of smooth talk and his presentation of the blunt facts of life are something which the British public will respond to. I was most impressed by the fact that he succeeded in inducing not only some of my Left-wing hon. Friends to wave their Order Papers yesterday, but also got the applause of the gnomes of Zurich last night and the Stock Exchange today. This is a unique political feat.

Mr. Heffer: I think my hon. Friend is mistaken. I do not think that he saw any Left-wing Members waving Order Papers.

Mr. Cronin: The Budget has clearly had a great psychological success. Its immediate effects have been entirely satisfactory. But it would be unwise to assume that it in any way provides a final solution to our balance of payments problems. The Budget is savagely deflationary but this is not really a matter

of congratulation by itself, because such deflation obviously causes a loss of productive resources which the country would otherwise have enjoyed. Despite this, it was obviously necessary and there has been no escape from it.
My right hon. Friend pointed out that our future, the way out of our economic difficulties, depends now very largely upon a successful export drive. He indicated clearly that the purpose of the Budget was to release resources for export. It would be unwise, however, to assume that the increased exports will take place automatically as a result of resources being released for them. My right hon. Friend the President of the Board of Trade said today that there had been an 8 per cent. increase in import prices and only a 4 per cent. rise in export prices. I am far from convinced that this margin of 4 per cent. by itself will make such an overwhelming difference to our future in the export market. I think this will depend very much on other factors.
Those who have dealt with exports are aware that the success one has in obtaining a contract is not usually brought about by a 4 per cent. margin. As time passes, that margin is likely to decrease. The plain fact is that our success in the export market will depend upon the results of the sales forces of exporting firms. The whole economy depends upon the success of the export drive, which depends in effect on a few thousand executives who are trying to sell British goods in all parts of the world.
I find myself wondering what incentive the Budget is giving to these people, who range from sales directors with very large incomes to sales managers, assistant sales managers, sales representatives and sales engineers, who get quite small incomes and who are sweating it out, often in rather disagreeable places in different parts of the world, away from their families, trying to increase our exports.
Travelling abroad, as most hon. Members are aware, is not necessarily a glamorous procedure. It is usually very hard work and usually involves our representatives being in rather disagreeable places under tedious conditions and suffering from the privations and separations I have referred to. It is a pity that there is not a more definite incentive to our


sales force to work harder and to compensate them in some way for their hardships.
To give them fiscal incentive now presents some difficulties. It was until recently possible for a company to let its sales representatives buy share options. This privilege was withdrawn by my right hon. Friend the Home Secretary for quite good reasons. Nevertheless, there is a case for restoring the right to buy share options to executives who work export-based companies or executives who deal entirely or largely with exports.
I certainly think that the Financial Secretary and his Treasury colleagues should consider very carefully what sort of additional incentives could be given to members of the sales forces of the firms in our export trade. The President of the Board of Trade indicated that it would be possible that the Government would reconsider the situation over export rebates. This is an advance in Government thinking which one is bound to welcome. The Government can, however, take even more effective action in encouraging firms to export than they have so far done.
There are a large number of firms living very comfortably on Government contracts. We have recently heard of firms which have been living rather too comfortably on Government contracts. The Government are surely able to exert some pressure on those firms to export more. Many of them, living so well on Government contracts, are making very little impact on the export market and they could do more if they devoted more thought and effort to it. There is a strong case for the Government applying more pressure upon firms to which they give contracts to export more. There might be a good case for diverting contracts away from firms which do not export sufficiently, towards firms with a better export record.
The President of the Board of Trade spoke of Government help in exports. This has been of a very high quality and a great help to our export trade. I have in mind the Government-organised exhibitions, the way in which they pay for part of the expenses of those exhibitions and sales projects abroad and also the valuable advice available, not only

from the Board of Trade in this country but from our commercial departments in embassies.
There was one aspect of the President's speech with which I was not completely happy, and that was his deployment of the regional employment policy. He suggested that there had been considerable success so far in redeployment of labour in the development areas. He did not give an entirely satisfactory reply when I intervened and asked him what would be the situation with regard to areas not within development areas, but which were nevertheless the site of localised unemployment.
In my constituency there are the South Derbyshire and Leicestershire miners, many of whom are or will be redundant as a result of pit closures. At the same time, it is difficult for firms to get industrial development certificates to set up appropriate industries to provide employment for these redundant men. The miners are most anxious that there should be alternative employment when they can no longer work in their pits. I do not want to labour what would appear to be a constituency point, but I am sure that this occurs in many other parts of the country. It would be agreeable if one could know that there would be speedy relief for the unemployed in this situation. I was not entirely reassured by the President of the Board of Trade's indication that this matter was being considered by the Hunt Committee, which would report in the autumn. Unemployed people want immediate help. They cannot wait patiently for a report due in the autumn.
To turn to the Budget itself, I was a little depressed by the heavy burden being carried by the motor industry and users of the motor car. The Chancellor perhaps does not appreciate how important a car is to workers in rural areas and the large proportion of people of very impecunious means who depend on motor cars.
I was a little puzzled why beer drinkers should have this extraordinarily favourable treatment. I feel sympathetic towards beer drinkers, but I do not see why they should have this particularly preferential treatment. I cannot help feeling that the Chancellor himself was not responsible for this concession. Perhaps some political master mind thought that it might be of electoral value.

Mr. Arthur Lewis: Harold does not drink beer!

Mr. Cronin: This concession will hardly make a big difference in the pending by-elections.

Mr. John Hall: Probably the reason is that beer is very heavily weighted in the Cost of Living Index.

Mr. Cronin: I do not think that such a consideration would encumber the minds of the Cabinet. The hon. Gentleman, for whom I have great respect, is perhaps displaying a little of the cynicism for which this House is being rightly criticised by the public. [Interruption.] Wrongly criticised, possibly. It depends on the personnel concerned.
The Budget requires certain ancillary measures. There are two important fields: public spending, and wages policy. I still think that there is some room for public expenditure to be scrutinised by the Treasury and the Department of Economic Affairs. I am completely opposed to any sort of whittling of social services. But I am sure that substantial economies could be made in some areas of public expenditure. Some hon. Members may not agree with me, but, in view of the statement by the Minister of Technology last week about the Bristol Siddeley engines contract, there is no room for the complacent belief that public money is always spent in the best possible way. I therefore hope that public spending will come under more scrutiny than perhaps has been the case in the past.
What really dismayed me in the speech of the Chancellor of the Exchequer was his indication that there would be, once more, a return to a statutory wage freeze. I thought that the statutory wage freeze was dead and damned. It is a little disturbing to see it showing these phoenix-like qualities of rising from the ashes. A statutory wage freeze has been a complete failure up to now. It is a good military maxim never to reinforce failure, always to exploit success. I am therefore very uncomfortable that the Chancellor is to resort again to these unfortunate methods.
I am not aware of any country, apart from totalitarian countries, in which a statutory wage freeze is part of the normal concept of government. I should

be very unhappy to see our country moving in this direction.

Mr. Heffer: Many totalitarian countries are in the process of abandoning the idea of a statutory wage policy.

Mr. Cronin: I am obliged to my hon. Friend for reinforcing my argument.
First, it is unlikely that such a policy will be successful unless it is retained for an intolerably long time. Secondly, the beneficiaries ultimately are always the shareholders, because increased profits result if wages are held down.
The Chancellor indicated that there would be some control of prices, but, except in a war-time economy, the control of prices is rarely successful. One can never stop the greengrocer putting the odd 3d. on a pound of tomatoes, whereas it is all too easy, if the Government are given powers, to produce a temporary freeze on wage increases.
So I hope that the Chancellor will not completely abandon the idea of some sort of voluntary treatment of this matter. It is evidently a big problem. It is obviously very important that there should be some solution of the question of increasing wages outrunning productivity. Nevertheless, I hope the Chancellor will not abandon the voluntary idea. I think it might be helpful if the Chancellor were to discuss these matters with the unions involved. I feel that in the past the unions may have felt some lack of confidence. I think it is quite probable that if the Chancellor himself consulted with them the question of confidence might not now be such a difficult one has it has been in the past. I hope that the Chancellor will have some second thoughts on this.
There is no doubt that the events of the last 24 hours have shown to us that the Government have now some firm and strong guidance as far as economic affairs are concerned. I think the Chancellor is certainly now the person in the strongest position in the Government to handle our economic affairs, I hope that at least we on this side of the House will give him the maximum possible support. I know that some of my hon. Friends find difficulties sometimes in supporting the Government completely in measures which may be repugnant to them, but it is obviously vitally important if we are to succeed in getting out of our


economic difficulties, that there should be some attempt at a consensus of opinion on this side and strong support for the Chancellor in his efforts.

8.47 p.m.

Mr. Nicholas Ridley: The hon. Member for Loughborough (Mr. Cronin) will not expect me to follow him in the two minutes which remain before the Front Benchers wish to start the wind up. I should like to make two points very quickly.
I do not quarrel with the decision to raise £923 million of extra taxation, given the amount which the Government have got to find, but I do quarrel with the enormous bills which the Government have run up both in overseas and in home spending. The terribly depressing thing about this Government is that they did not learn the lesson of the famous £750 million deficit of 1964. Last year the deficit was much bigger than in 1964. The total private sector contribution to the current account has gone from plus £30 million in 1964 to minus £65 million in 1967. Furthermore, Government expenditure overseas has gone up from minus £432 million in 1964 to minus £449 million in 1967. There was thus a worsening in the current balance of £112 million. The fact that the Government can actually spend more overseas themselves last year shows that the entire lesson of the 1964 deficit has passed them by, and far from economising in overseas expenditure on military and on aid account they have actually spent more. This seems to me to be an act of unforgiveable folly.
Secondly, the expenditure of the central Government at home has become badly out of control. It rose by £500 million during last year and by a further £600 million in the Estimates upon which this Budget is based. The point I want to make, however little time is available to me, is that we can no longer regard ourselves as having only to match the current expenditure of the Government with taxation because we must also cover the current capital lending of the Government.
The difference between what the Government have over-taxed us and what they have lent—the net borrowing requirement, as it is called—is a matter to which the country should be alerted. Over

the last seven of the Tory Budgets, the figure averaged £290 million. In 1965–66 it was £576 million. In 1966–67 it was £740 million. In 1967–68 it rose to the fantastic total of £1,449 million. So the deficit last year in the Government's accounts was nearly £1,500 million, and that gap was not met by taxation, because it was after the taxation surplus had been applied. Nor was it met by borrowing, because there was virtually no net borrowing last year. So we are left with the fact that these sums of money to fill the gap have to be printed by the Government.
The gap in this Budget is still £358 million, even after the colossal surplus of £1,386 million is applied. That is the gap between the total Government expenditure and the total yield of taxation. Therefore, I must ask the Financial Secretary what is to happen if the Estimates run away again this year and the Government spend another £500 million more than they bargain upon doing. Their budgeted deficit of £358 million will become some £800 million again, and, unlike my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), I must question whether in the Government's total inability to borrow there is sufficient taxation raised, even in those conditions.
I implore the Government to do something to encourage people to save money so that they can borrow it. The fact that there has been a total collapse of the Government's credit is partly responsible for their having to raise this enormous and unprecedented sum in taxation. Without some real policy for encouraging savings, there can be no hope of tax relief, even if the Government can bring their own expenditure under control. Failing that and failing the encouragement of savings, the prospects for the British taxpayer look very bleak, and next year we shall see a further mounting in the intolerable tax burden which is placed upon us.

8.52 p.m.

Mr. John Hall: We have had what can be described as a thoughtful, subdued and sparsely attended debate. The last time I had the privilege of speaking in a debate on economic affairs, which was in the course of the debate in reply to the Address on 7th November, the


House was no better attended than it is at present. This attracted the attention of one of the weekly journals, which suggested that perhaps I was responsible for the poor attendance. I felt rather hurt at that suggestion. I do not think it was true. In this case I think that we shall find more hon. Members coming into the Chamber as time goes on, even if only to hear the Financial Secretary.
The Financial Secretary to the Treasury has twice my experience in winding up on these occasions. He wound up at the same stage of the Budget debate last year, and I am sure that he will do it very well this time. But I cannot help reflecting that we should enjoy his speech much more if it were made from the back benches. We all remember with much enjoyment his witty and devastating attacks on the Government's economic and fiscal policy in the past, even though they were never supported by his feet in the Lobby as far as I know.
As a tribute to his skill in debate and his knowledge of financial affairs, the Government quickly silenced him by taking him into their Administration. Unfortunately, they cannot do that with all their critics, especially those who sit below the Gangway and make up what is known as the Left-wing of the party. Even a Government of this size could not accommodate all their critics. Nevertheless it is possible to silence them in other ways. On this occasion the bone of wealth tax was thrown to them to worry over, nad, judging by the baying of the hounds yesterday afternoon, that gimmick was very successful. I should like to know what the hon. Member for Manchester, Cheetham (Mr. Harold Lever) would have to say to that rather than the observations he might make on the wealth tax as Financial Secretary.
The President of the Board of Trade, after the usual cry of despair which on this side we have become used to hearing—"Well, what would you do?"—started by twitting my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) for quoting his own speeches. I wonder how many Ministers on the other side would be able to quote their speeches today. How many Ministers could quote extracts from speeches so penetrating, prophetic and relevant to our present-day problems as those quoted by my right hon. Friend?
In the course of his remarks, the President of the Board of Trade went on to claim as an achievement, showing how the economy of this country was recovering, a record number of registrations for new vehicles during the last three months. I was tempted and said, "What did he expect?" Naturally, there would be a record number of registrations of new vehicles, because everyone knew there would be a swingeing increase in Purchase Tax on cars in the Budget—and they were not disappointed.
The right hon. Gentleman paid tribute to the part played by invisible earnings in helping solve our balance of payments problems. This is a very well deserved tribute. Sometimes we tend to overlook the important part played by invisible earnings. Certainly the Chancellor appears to overlook this. Otherwise he would not have increased by 50 per cent. the S.E.T., which falls almost entirely on service industries and includes a large number of people who make a considerable contribution to our overseas earnings.
The Chancellor announced a very helpful concession on hotels, of which we are to have more details later. He referred to relief from S.E.T. to be given to rural hotels—relief for which my right hon. Friend has been pressing for the last two years. I suppose that what we press for for two years we get given in the third year, so we can go on hoping. But in referring to this relief he created a certain amount of confusion, because the last sentence on page 17 of the Financial Statement reads:
It is also proposed that full refunds shall be made in respect of employees in hotels in certain rural parts of Development Areas.
The right hon. Gentleman did not condition it in that way. What we should like to know—and these were the points raised by my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur) and my hon. Friend the Member for South Angus (Mr. BruceGardyne)—is whether this is a concession given to all hotels in rural areas throughout the country or all hotels in rural areas in development areas only. If that point could be cleared up it would be helpful.
Perhaps when answering this point the Financial Secretary might also be prepared to deal with the questions which


my right hon. Friend raised at the beginning of the debate today. First, how much do we owe? In other words, how much of the gold and dollar reserves are really ours? Secondly, what is the estimated effect of the measures which have been announced on unemployment? Thirdly, what effect is the Budget likely to have on prices in a full year and in 1967–68?
There are three other matters to which perhaps the hon. Gentleman might give his attention if he is able to answer them tonight. Two have been raised already by my hon. Friend the Member for Perth and East Perthshire. The first relates to the aggregation of income received by minors with the income of their parents. I should like to know whether this includes the income received by minors who have left home or have married. The second is: How far do the proposals regarding gifted insurarice policies and other gifts affect the Married Women's Property Act? The last point is a small one, but is of great interest to hop growers: What is the reason for removing the duty on hop oils?
During the second day of the debate on last year's Budget the Financial Secretary said:
If we analyse the situation we see that the fault of previous Chancellors was that they knew how to get growth and they knew how to get a balance-of-payments balanced—at least temporarily—but the combination of the two completely eluded them. This was the central fault of Conservative Governments. Our task—and I do not pretend that we have solved all the problems connected with it—is precisely to find a combination on which we can sustain the long-term achievement of growth and prosperity with a permanent and reliable balance of payments surplus."—[OFFICIAL REPORT, 12th April, 1967; Vol. 744, c. 1321.]
That was the problem as stated by the hon. Gentleman last year. It is the problem which the Government did not succeed in solving. It is the problem which is before us again this year.
It cannot be said that the Government have been an outstanding success. They have not succeeded in getting growth. They have not succeeded in getting a balance of payments surplus. They have not succeeded in raising the standard of living. Our worst enemies could hardly have hoped for more. We are deeply in debt. Our future is mortgaged to the hilt, with an adverse balance of trade for last year of £540 million, and with the

biggest adverse deficit in visible trade of £552 million that we have had since 1951, a year of some importance in the annals of the Labour Party. We are now running at a monthly deficit of about £57 million, as against last year's average of £46 million. It is no wonder that the Chancellor has had to produce the biggest increase in total taxes that we have seen in either peace or war.
Having said that, I must pay tribute to the Chancellor, as indeed have many hon. Members on both sides of the House. It was a beautifully delivered speech, skilfully drafted, and with just the right little touch of spite and venom towards the end of it which enabled him to sit down to resounding cheers especially from below the Gangway.
Relying as he did on that well known masochistic streak in the British people, the right hon. Gentleman realised that it was useless to build up the story of a tough Budget by Press announcements and leaks unless it was matched by even tougher measures. He realised that if he did not match the build-up with tough measures he would produce a dangerous anti-climax, and he produced a tough Budget which, even allowing for the argument which is developing about how much has been taken out the economy—and the estimates vary between £500 million and £600 million in actual withdrawal of demand, plus £120 million of increased costs because of higher prices for gas and Post Office services—has at least pleased the international bankers. Both sides of the House have described it as a Bankers' Budget, and it appears that it is the bankers, on whom the Labour Government have made this country so dependent, who are the predominant influence in the Budget.
The Chancellor has managed to please his party, or perhaps I should condition that by saying "not entirely". He has, on the whole, managed to please his party, because if the Budget is not the last chance for the country—and a country like this is one that not even this Government can wholly destroy—it is probably the last chance for the Labour Party. There was a dissenting voice in the chorus of approval which tended to greet the Chancellor's Budget. It was the voice of the hon. Member for Tottenham (Mr. Atkinson). I am sorry that he is not


here now. I suppose he represents the authentic voice of the Left. He had a number of interesting things to say about the Budget, and I wish that I had the note that I took of his speech at the time. He said that the Budget really meant considerable danger to the Labour Party, that it was a departure from the principles for which the Labour Party stood, and that it might well encompass its destruction. He seemed to be much more concerned with the possible effect on the Labour Party than that on the country.
Despite all that, the Chancellor of the Exchequer has every reason to feel very pleased with himself. Perhaps that feeling communicated itself to the B.B.C. announcer last night, when he was introduced as "Joy Jenkins. He is now the Party's pin-up boy", but remembering what happened on the Ides of March, which, economically speaking, are not yet past, perhaps the House might also remember that Julius Caesar said:
Let me have men about me that are fat;
Sleek-headed men and such as sleep o'nights;
Yond' Jenkius has a lean and hungry look;
He thinks too much; such men are dangerous.
I cannot join this "Joy through Roy" group.
To continue the nautical allusions which were fashionable last year, if the ship of state is run on the rocks through bad navigation and sheer inefficiency by both captain and crew, one can hardly be expected to applaud the first mate because he succeeds in lowering the lifeboat successfully, especially since we shall be expected to stay in that boat, rowing like hell and on hard rations, for the next two years. No one can look forward with pleasure to that type of voyage, nor have any confidence in the navigation after our experience of the last three and a half years. Our confidence is not much increased by the knowledge that the deputy captain, who has had every opportunity to see the navigation at first hand, has now left the bridge and, I have no doubt, wishes he could leave the ship as well.
No one would deny that after these three and a half years our situation demands the most stringent measures. A previous Chancellor appreciated the kind

of problems which have faced this country. He said:
As I pointed out in my speech during the defence debate, fiscal and monetary policy alone is not sufficient to achieve this transfer, and physical controls are also needed. But these physical controls will not be nearly so effective if they are working against the tide, and they must therefore be accompanied by a strict fiscal and monetary policy to restrain civilian expenditure.
That approach is very familiar. This was said by Mr. Gaitskell on 10th April, 1951.
He went on later to warn the House:
… a too severe Budget might give us losses, unemployment and austerity at home without any substantial benefit to our external position. We do not want deflation of this kind any more than we want inflation."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 828.]
That is an interesting commentary and warning, and it is also interesting that the parallel with 1951 is almost exact. I wonder whether it will be followed by what followed that Budget and whether we might have the same change as took place in that year—

Mr. Heffer: Not a chance.

Mr. Hall: No one would deny that the Chancellor has shown courage and determination in facing the problem which he found when he entered the Treasury. We all know that the measures that he has introduced will, by his own admission, reduce the standard of living. This is no new thing, of course: we have had it before, in 1946 and 1951. We do not know whether the measures will work or whether the sacrifices will be justified.
We do not know whether the Chancellor was justified in increasing S.E.T. merely because, so I understood him to say, it was so easy to collect. Many hon. Members on both sides are strongly opposed to S.E.T., and the speeches today, notably that of the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris), have obviously been antagonistic to the imposition of S.E.T. I do not want to debate the merits of the Tax, but the objections to it are well known.
I react to the Budget not as an economist, because I am not one, but as one of thousands of industrialists who have been called on to provide that extra drive, initiative and readiness to take risks—and accept the sort of discomfort of effort to


which the hon. Member for Loughborough (Mr. Cronin) referred in his interesting speech—in an attempt to solve our balance of payments problem, to increase growth and to provide the will without which it will be impossible to expand our social services and raise the standard of living in real terms.
What encouragement has been given to industrialists to do these things? To begin with, they are bedevilled with increasingly complicated and confused fiscal legislation which for the first time has led the Institute of Chartered Accountants to plead for a cessation of legislation of this kind because its members are being overwhelmed. Industry has already lost the export rebates which were worth more than £100 million, and another £100 million or thereabouts has already gone as a result of the withdrawal of the S.E.P. from manufacturing industry other than in development areas.
Service industries are to suffer a 50 per cent. increase, which will, we are told, yield £165 million in a full year. Industry is having to suffer increased Corporation Tax yielding another £98 million in a full year. There are increases in the price of petrol, diesel oil and road fund licences, and the greater part of the £119 million which will be yielded from those imposts will fall on the shoulders of industry, as will—and this has been pointed out in many speeches from both sides—the costs imposed by the Transport Bill, which must add considerably to industrial costs.
The costs of the services now being provided by the nationalised industries—gas, Post Office, power and so on—are all going up and I cannot see how nationalised steel is likely to depart from this trend. Wages and earnings continued to rise even during the last pay freeze, and very few people have any confidence that the tougher policy which the Government have promised is likely to be more successful in keeping wage demands down. In any event, in my view this is the wrong way to tackle the earnings-productivity problem. Industry must finance its operations, and this is particularly difficult when faced with the highest rate of interest we have ever had, this rate operating for so many months at a time.
Industry is faced with a shrinking home market due to the imposition of the taxes announced in the Budget; and presumably that is what the Chancellor intends. We are paying more in industry for imported raw materials because of devaluation and we are having to pay more generally because of rising costs at home. We are expected to make all this good by increasing exports, and that applies even to those companies which cannot export.
As my hon. Friend the Member for South Angus asked: is the Chancellor sure that the additional exports will materialise? Will they materialise before a recession on the home market produces growing unemployment? Is he sure that we are not at the beginning of a world recession? What will happen to our markets in the United States if America adopts the sort of tough policies which we are following? Would this be likely to improve our export prospects? In any event, as the hon. Member for Loughborough queried, what is there in the Budget to persuade anyone to take risks, work harder and make his operations more profitable? If he does so, he finds that, apart from attracting smears and jibes—these seem to be attracted nowadays by people who are successful—his efforts are likely to be absorbed by increasing public expenditure, his company or companies will pay more tax, he will not be able to reward his staff as he would like if the incomes policy which the Government will impose on us is successful, his savings will be taxed as "wealth" and the income earned from those savings will be decried and denounced as unearned and apparently, therefore, unclean. What an encouragement to the individual! Fettered and restricted, clocked and clouted by the Government he must be almost punch-drunk by now.
Is it the Government's philosophy that one achieves growth through restriction? Do they think they can get an enthusiastic response of the kind needed if the country is to solve its problems by the whip-lash of taxation? They bring back 300,000 people who did not pay tax before, and over 250,00 will find themselves for the first time paying the standard rate of tax.
The Chancellor tried to give some incentive to saving. Here I would not entirely agree with my hon. Friend the


Member for Louth (Sir C. Osborne). It is possible, because the Chancellor's proposals will tend to dry up a certain amount of spending, that savings might increase, but this will carry other dangers. Whatever dangers there might be, the Chancellor should not be inhibited by the post-war credit experience from responding to suggestions made by my right hon. Friend the Member for Enfield, West, who suggested an extremely imaginative S.A.Y.E. scheme. I should like to have given my version of it and put forward further ideas of ways in which one could encourage saving, but I promised to sit down at twenty minutes past nine in order to give more time to the Financial Secretary.
Certainly, very much more needs to be done to encourage savings, which as a percentage of total personal incomes have been falling constantly and have shown no tendency to rise much above 5 or 6 per cent. in the last few years. Perhaps the Chancellor and the Financial Secretary are hoping for great success from the new developments in Premium Bonds, which have been described from both sides of the House as "a squalid raffle", to quote the Prime Minister. Or perhaps they thought that by introducing a national lottery they may make it unnecessary to introduce special saving schemes. The Financial Secretary did not have a happy time when dealing with the National Lottery Bill in Committee, although he will remember that his words attracted the first compliment paid to the Government for some considerable time. His hon. Friend the Member for Horn-church (Mr. Alan Lee Williams) said that the Financial Secretary's forthright statement that the Government had fundamental anxieties about the drafting of the Bill was the clearest statement of Government policy which he had heard for some months.
I have said nothing about incomes policy except for a brief allusion. I describe it as incomes policy because it is not a prices and incomes policy. Do not let us kid ourselves. Of course, the Chancellor did not say much about it. He seemed to dismiss it at the beginning of his speech. I understand that it is to be debated fully tomorrow. I must put on record that I am against this form of incomes policy but I understand that in the situation into which -the Govern

ment have got themselves it may be necessary for the success of their policy.
Leaving that aside, I cannot help feeling that if we had introduced such a Budget it would have been greeted with a howling Opposition absolutely incoherent with rage which even a wealth tax, had we been foolish enough to introduce, one would not have assuaged. It would have deserved such a reception because it would have demonstrated the failure of all our policies. Three-and-a-half years and £2,260 million additional tax later, we are faced with two more hard slogging years with no greater guarantee that there will be any more success this time than in each of the Budgets of the last three years. Well may the people of the country cry in their hearts:
How long, oh Lord, how long?
The Budget demonstrates, if anything were needed to demonstrate, the complete failure of the Government. Let them put it to the test in the country.

9.20 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever): We have had a very interesting and, in some ways, enjoyable debate. Starting with the right hon. Gentleman the Leader of the Opposition, followed by the right hon. Member for Enfield, West (Mr. Iain Macleod) and other hon. Members opposite, there has been a unanimous tendency on the part of Opposition Members to come to a pessimistic conclusion about the outcome of the Budget.
Apart from the universal opinion on the other side in a pessimistic sense, there are other grounds for optimism. These I will seek to document by raising in broad form the three questions which are central for the discussion of the Budget. The first question is: is the global sum correct in relation to our needs? The second question is: are the means for raising that money fair and reasonable? The third question is: how does the Budget relate to our international position and obligations?
As to the first question, there has not been any challenge by right hon. and hon. Members opposite as to the justification of the global sum which is raised by the Budget. If there is any criticism at all of it, it is to be implied in the comments made by the right hon. Member


for Enfield, West and others in relation to public expenditure, the suggestion being that, if only we had cut public expenditure in a sufficient and satisfactory manner, the global sum the Chancellor had to raise would not have been necessary.
Right hon. and hon. Members opposite have been very long on generalisations in this respect but very short on concrete suggestions, with one honourable exception. The hon. Member for Twickenham (Mr. Gresham Cooke) offered us the suggestion that, if we reduced the heating in the House of Commons and halved the expenditure on organising the services of the House of Lords, we would be in a fair way to reinforcing our overseas trade position and bringing the country into balance. The hon. Gentleman probably made that suggestion for reducing the cost of heating in the confidence that any loss of warmth provided by the central heating system would be repaired by a sufficiency of hot air from other sources at no cost to the Exchequer.

Mr. Atkinson: Would not the proposals made by the hon. Member for Twickenham (Mr. Gresham Cooke) for reducing the heating in the House be the equivalent of the Government's attempt to reduce the dole?

Mr. Lever: I do not see the immediate relevance or value of that interruption, but I am very happy that my hon. Friend should at least have voiced the thoughts that were immediately in his mind.
I might have been more impressed by the Opposition's demand for cuts in expenditure in a general way were it not for the fact that we have been constantly plagued by them for additions to expenditure in particular ways, notably on defence and other similar subjects.
One general criticism made by the right hon. Member for Enfield, West ought to be answered. He said that public expenditure had run ahead too fast because its expansion had been related to targets for economic growth which had not been achieved. I think that there is some justice in that assertion, but I remind the House that it is the Government's clear intention to reverse that situation—that is, to achieve an economic growth which will be larger than the targets for

public expenditure. This is a firm pledge by the Government.
I hope that the right hon. Member for Enfield, West will not think me surly when I say that he does not altogether encourage his old admirers. I read almost everything the right hon. Gentleman writes and not a little of what he says. It is a little unfair, when he is opening his criticism of the Budget, that his speech should consist largely of a compendium of speeches I have already considered. Either I shall be obliged to discontinue my rôle as a devoted reader of his efforts in the Press or discontinue my attendance as a devoted audience in the House of Commons.
The right hon. Gentleman hesitated a criticism of the global sum involved in the Budget, suggesting that there might be an elment of over-kill in it. The House must be clear about this. This is a crucial time for this country, and the Budget decision is crucial in relation to that time. Economics in Government management are not an exact science, and, whichever party has the privilege of conducting our affairs, there is no means by which one can hit a target with precision and exactitude. In a crucial situation such as this, no risks could be taken. If we have erred, we admit that we have erred on the side of caution. But, whereas if one errs on the side of incaution, it is too late to correct that incaution because one is overtaken by a financial crisis, if one errs on the side of caution there are ample monetary and other instruments at the disposal of the Government to put matters right in good time.
The hon. Member for Horsham (Mr. Hordern) suggested that the growth rate of 3 per cent. announced by the Chancellor in some way evidences the diktat of the international monetary authorities because, before it had been issued, he says, we had predicted a 4 per cent. growth rate. The 3 per cent. growth rate is a minimum, a cautious minimum, and there is no reason whatever, if our export trade expands, why we should not have a growth rate faster than 3 per cent., and up to 4 per cent.
I emphasise—this has, apparently, not been clear to all hon. Members opposite or to some of my hon. Friends—that it is not a deflationary Budget. This is a Budget related to an expansion of production, not a deflationary Budget related


to either a setting back or a halting of production. The difference between this Budget, in relation to the growth we expect to achieve, and other Budgets is precisely that, this time, we are taking no chances and we shall ensure that the growth which will take place of at least 3 per cert. will take place iron-clad in the export area so as to keep our balance of payments in order. That is the reason for these severe measures. They are not severe with a view to retarding production or retarding growth. They are severe in order to ensure that the growth occurs consistently with a successful balance of payments.
I turn now to my second question. Are the means for raising the global sum fair and reasonable? Here I do not want to descend to details because many of the questions asked will be better considered when the Finance Bill has been published. It would be a waste of the time of the House to argue details of taxes not yet fully stated in statutory form and in respect of which the precise interpretation in legislation will be available for discussion. [HON. MEMBERS: "We have to vote on them."] The general nature of the taxes is indicated sufficiently in the Resolutions. [HON. MEMBERS: "No."] Do hon. Members want me to engage in long and tedious detail? [HON. MEMBERS: "Yes."] Apparently, there are some hon. Members—a minority—who are anxious to hear me in tedious detail. I can arrange that they will be suitably rewarded, but not until I have dealt with the major points in my speech.
For my part, I do not mind going on record as saying that far the most important feature in a Budget is the global sum being raised. The details of how it is raised are a matter for the ingenuity of constituency orators on the back benches and for the tormented Treasury officials who have to make some response to that oratory. But on the whole, if one starts with a system which is tolerably fair and reasonable, any additions to or subtractions from the global sum of taxation are not a fundamental matter.
There are dozens of ways of raising taxation, all of them unsatisfactory. One thing to be said for the particular form of oratory favoured in Budget debates in criticising the taxes proposed is that there is a veritable encyclopaedia of

classical allusions along the same line to almost every kind of tax one can think of. It is said that the whisky tax ruins the Scotch whisky industry, that Income Tax destroys incentives, and so we can go on right through the list of taxes. Unhappily, there is no comparable encyclopaedia for constructive suggestions for tax.
All I can say is that this year there has been no serious challenge to the means for raising revenue. We have not seen any real challenge to the main items in the Finance Bill raising the revenue. Surprisingly, we have heard nothing in criticism of the special charge. No doubt when we come to the minutiae of that interesting innovation we shall hear more after the Finance Bill is published. I see that hon. Members have anticipated the advice I have given, at any rate in respect of that charge. There has been no criticism of the Purchase Tax increases and no criticism of the dividend limitation policy, which in itself is a means of curbing demand to make room for exports. There has been no criticism of my right hon. Friend's decision to add not a penny, even at this hour of difficulty, to any tax on anybody's earnings.
There has been a certain amount of critcism of the S.E.T. Unfortunately, this criticism has not been accompanied by any suggestion for an alternative means of raising tax. [Interruption.] It is all right saying "Come off it", but the fact remains that it is the easiest thing in the world to dismiss the tax in a sweeping phrase. I accept that it has many anomalies, but, unhappily, so have most taxes. It may have more than others—[HON. MEMBERS: "Hear, hear."]—but criticisms would be far more valuable if they were accompanied by reasonable suggestions as to how we raise the £500 million that would be needed if it were abolished.

Mr. Thorpe: It is obvious that the hon. Gentleman was not present when I was lucky enough to catch Mr. Speaker's eye. I suggested that a payroll tax could be introduced which could be varied regionally, with total exemption in the development areas. Therefore, the hon. Gentleman is not correct in the assumption that nobody put forward a practical alternative to S.E.T.

An Hon. Member: What about the value added tax?

Mr. Lever: I greatly regret that I was called from the Chamber when the right hon. Gentleman was speaking, and I am very happy that he has so succinctly made good my omission. In the light of what he said, I shall withdraw that criticism, at any rate in relation to him. There is a good deal of attraction in the general payroll tax, and it might well be considered as an alternative to S.E.T., but is there all that revolutionary a difference between the two? [Interruption.] Hon. Members may have their own point of view about that. All I can say is that it is a tax of a rather similar nature.
I do not want to return to the same tedious arguments on the S.E.T. with which the House has been enlivened on previous occasions. There is a point of view that a payroll tax affecting a whole range of payrolls might be substituted, at a somewhat lower rate, for a selective tax on service industries. On the other hand, hon. Members are familiar with the answer that on the whole manufacturing industry bears a pretty high rate of tax in relation to its goods via the Purchase Tax.
There has been criticism of the details of family allowances and of wages policy, but I think that I should be wise to leave those points, which will receive a detailed answer when my right hon. Friend the Secretary of State for Economic Affairs addresses the House—I think that it is tomorrow. But before I pass from the subject, I should mention that in criticising the policy in relation to family allowances and wages some extraordinarily extravagant language was used. The right hon. Member for Bexley (Mr. Heath) said that this proved we were in pawn to the bankers. The Leader of the Opposition said:
It is a cover for the fact that the Government's creditors insist on a stiff, tough statutory policy for wages. No doubt this is a condition of the additional standby."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 306.]
Presumably, he was referring to the credit announced over the weekend.
My hon. Friend the Member for Tottenham (Mr. Atkinson), in some dubious company, today said that this was a banker's Budget, a defeat for expansion

ists. He, too, seemed to subscribe to the opinion that, in some way, the foreign exchange market was responsible, in alliance with international bankers, for the Government's income policy.

Mr. Atkinson: It is worse if the Government do it voluntarily.

Mr. Lever: Whatever the degree of moral turpitude involved, my hon. Friend must make up his mind whether we do it from innate viciousness or hostility to the working people or at the behest of international bankers. It is hon. Members who have suggested that. But, in fact, the Government have done this in pursuit of their policy of stabilising wage costs in which rises in wages are linked to production. I shall not go into details of the wages policy because we shall have a full debate on that, led by the Minister responsible.
But there seems an astonishing coalition between the Leader of the Opposition, the right hon. Member for Enfield, West and my hon. Friend the Member for Tottenham in the conviction that this policy was undertaken at the request of the bankers and that the Budget as a whole is a bankers' Budget, something in the nature of a bankers' ramp.

Mr. Atkinson: rose—

Mr. Lever: My hon. Friend has made a number of interruptions. He might let me finish my sentence. My right hon. Friend the Member for Belper (Mr. George Brown) disclaimed that it was his intention to attempt to seize the leadership of the Left. It is quite apparent that he would have had formidable competition in such an attempt from the Leader of the Opposition and the right hon. Member for Enfield, West.

Mr. Atkinson: I must point out that there is a tremendous difference between hon. Members on this side and hon. Members opposite. Hon. Members opposite believe that any wages policy should be operated by the employers, backed by legislation, at the point of production, when they would refuse wage increases. We believe that there are other inhibitors we can use in the economy without attacking wages in this way.

Mr. Lever: I pause only to remind my hon. Friend that, despite apparent support from hon. Members opposite, there was


evident relief on their benches about the difference between my hon. Friend and themselves. But I do not complain of the difference in point of view that he holds from the Government on this very difficult subject. What I do rather criticise is his willingness to encourage this generalised assertion, based on no reality whatever, which alleges that this policy has been undertaken by the Government at the diktat of international bankers and persons who advance credits.
It is understandable that the Leader of the Opposition might fancy striking a popular note in suggesting that the Government have sold their souls to the gnomes of Zurich and other shady financial circles, but it seemed a little surprising to find that sort of assertion made by hon. Members on this side without any attempt to document or support so offensive an imputation.

Mr. Atkinson: We have been saying it a lot longer than they have.

Mr. Lever: An innocent piece of demagogy freely to be excused in right hon. and hon. Gentlemen opposite is rather more grave when coming from my hon. Friends, and I hope that they will not mind my saying so.

Mr. James Dickens: Judging by the tone of the statement by the T.U.C. last night, it takes this view, too. Judging also by the leading article in the Guardian this morning, a great Liberal paper, headed "A Bankers' Budget", the view is fairly widely held.

Mr. Lever: All I can say to my hon. Friends and hon. and right hon. Gentlemen opposite who hold the view that this is a bankers' dictated Budget is that they ought to get together for an amusing exchange of hallucinations. I am bound to tell my hon. Friend that I was present—and it was a great privilege—at the conference of bankers in the board room at Washington. How they tolerated a person so alien to their normal discussions has yet to be discovered. Their discussions are normally held only among themselves. What has been said about their attitude and the conditions that they were seeking to make bear no relation to the realities of the conversations and the discussions held there. I beg some of my hon. Friends to try to bring their comments upon the inter

national banking machinery into some relation with the realities of the facts.

Mr. John Smith: Would the hon. Gentleman agree that bankers are sometimes right?

Mr. Lever: What I am about to prove to my hon. Friends, I hope, is that central bankers are not infrequently Left. That is the position I wish to put to the House and my hon. Friends The first point that must be noted about the meetings of the bankers at Washington was that, far from being a conspiracy of central bankers bent in a sinister way to organise deflation, unemployment and the retardation of growth, it was a meeting of central bankers precisely to cope with and discipline anarchic individual speculators in the gold currency markets of the world.
They met to curb this speculation precisely in order to protect the monetary system from disruption, so that it could accommodate, not policies of restriction and deflation, but policies of growth, high employment, and low interest rates. If hon. Members on both sides of the House would pay a little more attention to that kind of reality, we would be more constructive in our debates. One ought to point out that the bankers who met in Washington last weekend are the direct successors of the founders of Bretton Woods, which organised the monetary system that accommodated the greatest continued prosperity the world has ever known, the highest level of unemployment that the world has ever known and the greatest enrichment of the working people of Europe that can be recalled in history. All this was done within the flexible and ingenious monetary system organised from Bretton Woods, and continued in the great work undertaken at Washington last weekend.
It is worth remembering that these are the people who have organised the monetary system of the world to accommodate a period of uniquely rising expectations among the peoples of the world for growth, prosperity, financial and economic security. This is the reality of the central bankers. My hon. Friends often are thinking in terms of nineteenth century literature, of the Pierpont Morgans and the Rockefellers in their wildest moments. I emphasise again that these


central bankers are the financial handmaidens of Government, and their rôle has been not to dictate policy, good or ill, but to make possible, within the existing monetary framework the liberal, forward-looking policies of Governments anxious to achieve maximum economic growth, high employment rates, high standards of life and to maximise the prospects of continued and sustained prosperity all over the world.

Mr. John M. Temple: Would the hon. Gentleman add "and the salvation of a Labour Government on many occasions"?

Mr. Lever: And the salvation of Tory and Labour Governments on many occasions when the financial and monetary system caused Governments of both complexions to have difficulties.
We must realise that the international monetary system is in a process of evolution in the post-war world. The international liquidity which has lain at the base of so much of the prosperity to which I have referred derived from a continuing dollar deficit, a considerable sterling deficit and great realisation of capital accumulated in the sterling reserves, the reduction of which placed a great burden on this country in its difficulties in seeking to finance it.
It is important not to see the rôle of the central bankers in terms of fearful fantasies based on no fact whatever. These are not private bankers. They are the central bankers of the great progressive nations of the world. The question for these central bankers in all the discussions has never been whether the monetary system should be organised to finance high employment and wealth creation, but only how the monetary system should be organised so as to permit the creation of maximum wealth and the highest possible level of employment.
There was not one central banker in Washington last weekend who did not believe in an increasing world liquidity which would make possible that increase of that world's trade and prosperity and all that flows from it. The Washington Conference had more particularly to concern itself to find a solution to stop the drain on gold which was arising because of the private speculation on a possible increase in that price of gold. A solu

tion was essential rather than the sermonising which one usually gets on this subject. If the bankers did not engage so much in moralising as would appeal to some hon. Members, they engaged very effectively in remedies, which was perhaps more relevant to our prospects.
They emerged with a dual price system. The right hon. Member for Enfield, West asked whether that was a durable system. It is a little dangerous to make predictions at this early stage. All that I can say is that if within the next few weeks the United States attends to its economic and financial affairs as effectively as my right hon. Friend is attending to ours in this Budget, I would certainly confidently predict that durability of that dual price system.

Mr. Heffer: rose—

Mr. Lever: I cannot keep giving way. All that will happen is that there will be a series of—

Mr. Heffer: Would my hon. Friend give way on this very point? He has talked about the United States dealing with its problems in the way that we have dealt with ours. Surely the point is that we shall find that there will be heavy deflationary policies in the United States and we will immediately run into trouble because we are concerned with an export-led boom. Would my hon. Friend give us the answer to that one?

Sir Arthur Vere Harvey: Suppose that the United States does not deal with its problems in the same way as the Chancellor of the Exchequer dealt with ours yesterday. Then what happens to the £?

Mr. Lever: Caught as I am on the horns of this dilemma, I will do my best to reply. If the pessimistic conclusion of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) comes about, namely, that there is some form of deflation in the United States, all that is required from the United States is to make some noticeable reduction in its deficit, running presently towards 5 billion dollars a year. If it reduced by 2 or 3 billion dollars, this would have a striking effect on confidence in the dollar. [Interruption.] It is bad enough trying to manage the affairs of the United Kingdom, even in a minor rôle and with


frequent interruptions, without being saddled with that great Continent's problems, too. The problem of deficits is a problem not only of deficit countries but of surplus countries. Countries like Germany, France and Italy, which are running a very substantial surplus, must be willing to accommodate the adjustment in American policy. To see how relatively easy it is, if Germany alone would be content to run in balance for a twelve month to the advantage of the United States the problem would be virtually solved. If, on the other hand, as the hon. Member for Macclesfield (Sir A. V. Harvey) forebodes, the United States does not deal with the problem, very real difficulties and new problems will present themselves. All I can say is that we for our part will have the satisfaction of knowing that we have done everything which it fell to us to do, without holding back because of some possibility of the President of the United States having difficulties in this regard.
I have every confidence in the durability of the dual price system. I had it when the agreement was reached in the board room of the Federal Reserve at Washington. I have it much more today when gold in the free price market is standing at 37 dollars, a very much better figure than that hoped for by the enemies of the dual price system and those who so avidly speculated in gold.
The purpose of the dual price system is to gain time for the introduction of S.D.R.s, and to perfect a special monetary mechanism to deal with the problem which faces us. Hon. Members should not be bewitched by specific measures which the international monetary system and the international bankers have taken in their search for means for helping the world towards prosperity. They have come up with some extraordinary ingenuities which have had the noticeable following result, that whereas the total gold supply in the hands of the central bankers in the last 20 years has only increased by 20 per cent., world trade has multiplied five times in the same period on this tiny increase in gold stocks.

Mr. Iain Macleod: If the Financial Secretary is drawing to the end of the extraordinary vote of thanks to the central bankers, would he please take up two points of more immediate interest to this House which I asked him at the

beginning of today's debate? What is the effect on employment, and what is the effect on prices, of this Budget?

Mr. Lever: Well, I am very sorry to have to say this, but that is not related to the theme I am trying to give to the House, and the right hon. Gentleman must wait till other speakers in these Budget debates develop these points in more detail than I perhaps am qualified to do.

Mr. MacArthur: rose—

Mr. Speaker: Order. The hon. Member must not seek to insist, if the Financial Secretary has not given way.

Mr. Lever: The position in so far as the American dollar is concerned is that we cannot solve the problem of the dollar deficit; we can and must solve the problem of the United Kingdom deficit, and that is precisely what this Budget proposes to do. I am sorry that the right hon. Gentleman finds it tedious to have to listen to some correction of the flights of fancy which have taken place about central bankers and their activities. I think this is a vital subject, and it is absolutely vital that the kind of vulgar criticism one has heard from time to time of their supposed rôle should be replaced by some consideration of their proper rôle, to which the world owes so much of its prosperity. It is no use any hon. Member opposite saying I am looking at the wrong benches. The fact remains that where by compulsion of argument or by the persuasion of some of my hon. Friends behind me or by the simple process of their friendly infection, the notion which for so long has been harboured by some of my hon. Friends seems to have taken root on the occupants of the Front Bench opposite, who seem to have the most extraordinary notions as to how the central bankers operate, and of their duties and what their rôle is in the world's economy.
So, as I have said, the right hon. Gentleman should satisfy himself, if he takes any assurance from me, that the dual price system is a durable one and will give the world ample time, especially if the United Kingdom guts its affairs into balance, and especially if the United States moves in the same direction, to organise the monetary mechanisms, including the S.D.R.s, which will enable the world's prosperity to continue, and avoid the


danger, the very real danger sometimes, of a breakdown in the world's monetary system.
There is one important point with which I want to deal before I come to my conclusions, and that is the position of sterling in this matter. It is perfectly plain to everyone now that one of the problems that this country has had to face whether with Tory Governments or Labour Governments, has been the sterling problem. That problem can be stated thus in the few brief sentences now remaining to me.
Our sterling system was structured with a relation to a bygone situation which no longer applies in our country. It was structured to a situation of wealth, power, connections and resources which, unhappily, are no longer ours. The world has changed, and the difficulties which we have had to face on many occasions have arisen because the sterling area system has not been able too readily to change smoothly to meet the changing world.
This must be dealt with, and it can only be dealt with by international monetary co-operation. The Government stand absolutely and genuinely ready to seek international co-operation in bringing the rôle of sterling in the modern world up to date and directly into relation with the realities of our situation and the realities of the situation in the world.
However, three matters must be clearly stated. There must be safeguards for all sterling holders, and all our obligations to them must be honoured. There is no easy way out in this respect consistent with our honour.

Mr. Richard Wainwright: Devaluation.

Mr. Lever: The hon. Gentleman ought to be financially literate enough to know that the devaluation of sterling was in no sense a repudiation of our obligations.
The second point which must be made is that those who have taken part in the international arrangements relating to sterling must be safeguarded, too, and this must also play a part in any discussion and organisation of these matters.
Finally, we have to safeguard the interests of the United Kingdom and of United Kingdom traders holding sterling.

Mr. John Hall: I cut my own speech short to give extra time to the Financial Secretary. Will he not reply to any of our questions? If not, can he assure the House that they will be replied to in the course of the Budget debate?

Mr. Lever: I do not know the answers that right hon. and hon. Gentlemen want. I have given them the major outlines of the Budget proposals. I shall be happy to answer their detailed questions when we come to deal with the Finance Bill. I think it a profitless task to answer questions of detail when we do not have the details of the Finance Bill before us. The right hon. Member for Enfield, West asked a number of pertinent questions, and I have told him more than once that they will be dealt with by my right hon. Friends who will be speaking tomorrow and on subsequent days. He gains no point, except a very shallow debating one, by seeking to press me for answers to them.
I have dealt with the Budget in its main details. I hope that I have dealt with its relation to the international monetary situation to the satisfaction of the House. This Budget will play a great part in achieving at long last not only the growth that we expect but a growth consistent with our balance of payments.
Long after the recitatives of melancholy which we have heard today from so many hon. and right hon. Gentlemen opposite have been forgotten, this Budget will be remembered in future years as being of decisive importance, and it will be a credit to the courage of the Chancellor and of the Government who introduced it. I ask the House to give it its support.

Debate adjourned.—[Mr. Armstrong.]

Debate to be resumed Tomorrow.

BOTSWANA (GIFT OF A PARLIAMENTARY LIBRARY AND SILVER INKSTAND)

Mr. Kenneth Lomas to have leave of absence, in place of Mr. John Ellis, to present, with the other Members appointed on 25th January and 27th February, a Parliamentary Library and Silver Inkstand to the National Assembly of Botswana.—[Mr. Armstrong.]

Orders of the Day — ACCUSED PERSONS (MISTAKEN IDENTITY)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Armstrong.]

10.0 p.m.

Mr. Edward Lyons: Mr. Speaker, it is the uncomfortable and inescapable fact that in England innocent people are charged with or convicted of criminal offences more often than hitherto we would have believed possible. This emerges from the spate of mistaken identity cases which have come to light within the past year. I know of at least five cases in the past 12 months, three of them in Bradford alone, in which men have been charged, committed, or convicted on identity evidence alone—evidence which has later proved to be totally wrong.
Harry Wimpress of Bradford, 61 years of age, of good character, but poor health, and with an ailing wife, was charged in March 1967 with robbery with violence of a nurse. A 21-year-old girl positively identified Wimpress on an identification parade. She identified him as her assailant and as a man she had long known. He was committed for trial at Leeds Assizes.
Patrick Crundall was charged with six offences of Larceny in Bradford in October 1967. Six women positively identified him as the thief. He was committed for trial to Bradford Sessions. He realised that the evidence against him was so overwhelming that acquittal was impossible and was contemplating changing his plea to guilty to obtain a lighter sentence.
Albert Edward Chapman of Bradford was charged with using a car knowing it to have been stolen and assaulting the police. He was positively identified by a police officer and a lay driver, neither of whom had any doubt about identification. He was committed to Bradford Sessions and duly convicted by a jury in February of this year and sentenced to nine months' imprisonment.
Albert Powell at Richmond in 1967 was charged with an offence against a girl. He was identified by the victim, her sister and a youth. He was committed to the South-West London Sessions for trial.
Oden Maxim, Newton Campbell and another youth, all of good character, were

charged in February of this year at Birmingham with robbery with violence. The victim identified all of them.
There we have five cases and in all 13 witnesses positively identified these seven men. The witnesses were honest people trying to do their best, but they were devastatingly and horrifyingly mistaken. In each of those five cases the men protested their innocence. Certainly the Bradford men were ably represented. In all cases the real culprits later confessed to those crimes in time for all, save Chapman, to be discharged before conviction.
The National Council for Civil Liberties says that it knows of yet other cases and the organisation Justice is anxious about identity cases. These cases constitute a crushing argument against the death penalty. If we still lived in the days when theft was punished by hanging, Chapman might by now have been a dead man. A man, to vindicate another, might volunteer his guilt out of conscience if the offence is not too serious. He would not be prepared to do it in a case of murder. It is an obvious inference, too, that for every case where a guilty man has come forward to assist a man mistakenly accused, there must be many cases when the guilty man has not confessed. This gives rise to the question: how many innocent men must there now be in British prisons?
It cannot begin to be said that these are freak cases. There are too many for that. Anyone could find himself in the position of Harry Wimpress or Albert Edward Chapman.
Some lawyers argue that no person should be convicted solely on identification evidence. It is demanded that there should be some independent piece of corroborative evidence. This may be asking too much—I think it is—but at the very least judges should be instructed to warn juries of the unreliability of identity evidence and should warn them about convicting on such evidence unsupported by other evidence. This is particularly essential in view of the refusal of the Court of Appeal to allow appeals against conviction where there is any credible identity evidence, albeit there is a lack of other corroborative evidence.
The police should be instructed that where the only evidence is identity


evidence they must make an immediate and thorough check of any alibi that is offered. It has to be remembered that juries are prone to believe evidence of identity because the witness giving that evidence usually has no ulterior motive, and is trying to tell the truth.
These cases, particularly that of Chapman, give rise to concern over the lack of publicity inherent in lower court proceedings due to the operation of the new Criminal Justice Act. The man who committed the offence for which Chapman was convicted only read of the Sessions trial of Chapman. Had there been publicity in the lower court that man might have known of Chapman's plight earlier, and Chapman might have been spared much misery.
The Government should ensure that whether or not a man is represented by a solicitor he is told by the court clerk of his right to seek publicity. If no journalist is in court, but one is thought to be elsewhere in the building, an adjournment of a few minutes should be granted to enable that journalist to be notified by the solicitor or the clerk of the court.
Harry Wimpress spent 36 hours in prison. He was an ailing man, with a sick wife. He has really never fully recovered from the shock. Patrick Crundall was in custody for four weeks, and he lost his job. Albert Chapman served 17 days of his sentence. Albert Powell spent three days in custody. Mr. Maxim and Mr. Campbell spent ten days in custody, and Mr. Maxim lost his job. All of them, conscious as they were of their innocence, felt themselves drowning in a nightmare sea. The situation, however, is that compensation for such people is not available as of right. It depends on the whim of the Home Secretary of the day, guided by a set of unpublished rules. The Criminal Injuries Compensation Board is a non-statutory body which compensates victims of crimes. Who is more a victim of a crime than a man wrongly charged with it? I urge the Government to announce that in future all claims for compensation by men who have been charged with, or convicted of an offence in respect of which other men have subsequently been convicted, will be dealt with by the Criminal Injuries Compensation Board. The total annual

cost would be small, and I hope, too, that the Board, unlike the situation at present, will be ordered to make public its awards.
A few weeks ago I suggested to my hon. and learned Friend that these cases should be referred to this Board. He called the suggestion ingenious, but he rejected it. He claimed that it would result in injustice to those who, although acquitted, could not so conclusively establish their innocence. His reasoning did not commend itself to me. The civil law grants damages to victims of negligence who can prove it, but not to those who cannot. To proclaim equality of injustice is a novel and unhappy doctrine, and I hope that my hon. and learned Friend will think better of it.
If we are to maintain our proud boast that British justice is as good as the best in the world, we must be exceedingly unhappy with occasional injustice, and the lessons of these cases—and there may be many others—must be taken to heart, and our proceedings of trial and compensation adapted accordingly.

10.10 p.m.

Mr. Arthur Davidson: We should all be grateful to my hon. Friend the Member for Bradford, East (Mr. Edward Lyons) for raising this important topic. When obsessed, as we have been in the last few days, with the lot of millions of people and the subject of hundreds of millions of £s, it is easy to forget that, under the fairest judicial system and the highest police standards in the world, some of our citizens can still suffer the most fearful, frightening and nightmarish experience of all—being charged with and convicted of a crime they did not commit, not because the evidence is corrupt, or the witnesses or police "bent", but because of a genuine mistake in identity, possibly through over-eagerness or confusion.
Many of us may have seen the film "The Wrong Man", directed by Alfred Hitchcock, in which Henry Fonda suffered, in his usual bewildered and bemused manner, just such an experience. I said at the time, "It cannot happen here," but, as my hon. Friend said, it can and does happen here and it may continue to happen. While many of us criticise scientific evidence, in fact fingerprint evidence and so on is usually


reliable. It is the human eye which can be unreliable or suspect.
One of my most horrifying experiences in this House was when I was called instead of someone else, when I had not risen, or had intended to speak, in the middle of a most tense debate in which passions were greatly roused on both sides. I regret to say that I had been taking no interest in the debate, and, although the hon. Gentleman who spoke made a reasonably good speech, I do not think that it was quite as good as I would have made. That was a case of mistaken identity.
Victims of wrongful arrest through these mistakes do not get compensation from the Criminal Injuries Compensation Board and this is absurd, considering that some of the awards which the Board makes are to say the least, questionable. It seems wrong that there should be compensation for a victim of a fight in a drunken brawl in a pub, and on which the victim may have been in some way responsible, but not as of right for those who face this frightening experience. The damage to a victim convicted of a crime which he did not commit is incalculable: not only does he suffer the indignities of anyone who has to face a court—

Mr. Speaker: Order. The hon. Gentleman says that such a person cannot get compensation as of right. If he cannot get it as of right, does the hon. Gentleman wish to change the law? If so, I should point out that he cannot argue the case for doing so on the Adjournment.

Mr. Davidson: I appreciate that, Mr. Speaker, and I was only contrasting the awards made by the Board in some cases with the fact that they are not made in others.
One of the damages to such a victim is not only these indignities but also humiliation and mistrust in a previously happy family. I hope that my hon. and learned Friend will consider this matter, because it is causing great concern.

10.15 p.m.

The Under-Secretary of State for the Home Department (Mr. Dick Taverne): I am pleased that my hon. Friend the Member for Bradford, East (Mr. Edward

Lyons) has raised this matter. Sometimes a rather defensive attitude is taken which suggests that no miscarriages of justice can take place in our excellent system of justice. I do not take that view. I do not believe that there is any point in denying that in our system of justice, however good it may be, some miscarriages take place. Indeed, I cannot think of any system of justice that could be foolproof against such miscarriages.
At the Home Office I have to review a great many cases. Most of them are totally unmeritorious, but it occasionally happens that one feels a terrifying doubt about the verdict of the jury. We cannot substitute our view for that of the jury or the Court of Appeal, but, nevertheless, one has doubts. Occasionally a case comes to light—my hon. Friend mentioned five—where it is shown that the system of justice has gone wrong. I do not believe that any system, however carefully prepared, can be foolproof, but clearly one must see what possible safeguards one can provide to prevent these horrifying cases from happening because each is horrifying and one must have complete and utter sympathy for those who are affected.
My hon. Friend the Member for Bradford, East and my hon. Friend the Member for Accrington (Mr. Arthur Davidson) have between them raised four issues. The first is the cases to which they referred. The second is the approach which we must have towards identification evidence. The third is the question of committal proceedings and their reports. The fourth is the issue of compensation.
I will refer to some of these cases, and particularly the Bradford ones, since I assume that my hon. Friend wishes to concentrate on that issue. There have, unfortunately, been several cases in Bradford. In the most recent case, that of Mr. Chapman, I unfortunately cannot say very much because the case is to come before the Court of Appeal and it is, therefore, sub judice. It would not be proper for me to go into the details of that case and I will, therefore, mention only one or two features of it.

Mr. Speaker: Order. It would not be proper for the Minister to go into it at all, would it?

Mr. Taverne: It would not, Mr. Speaker. I stand corrected. I cannot deal with the Chapman case because it is still sub judice.
However, as for the earlier cases, it is natural to assume that there must have been some default or carelessness, to say the least, on the part of the police and the prosecution, and the first thing to which the House is entitled is some reassurance on this point. As regards the first case, Mr. Wimpress was accused of attacking and robbing a nurse. The victim was unable to identify her assailant—and on this point my hon. Friend was somewhat wrong—but another nurse, who was a witness, thought that she recognised the assailant and thought that she recognised him as a man whom she had known some years before. She was able to give sufficient information to the police to enable them to trace the man to whom she thought she was referring. He was put on an identification parade, which was perfectly properly conducted, and she picked him out.
Here is a quite astonishing case in which an independent witness, with no question of malice whatever and with no question of dishonesty arising, made a quite extraordinary mistake in thinking that the man who was the assailant was a 60-year-old man when, in fact, it later transpired that the man concerned was aged 20. There was certainly here no question of default on the part of the prosecuting authority or the police.
Mr. Crundall's case arose from a series of incidents in which women were approached in the street or in a shop by a man who asked for change and who then grabbed the money offered and ran off. Mr. Crundall was charged with six offences of larceny arising from five separate incidents, and it will be agreed that the identification evidence against him was exceptionally strong. Indeed, I am not surprised because I have seen photographs of Mr. Crundall and the man who later admitted committing the crime. The resemblance is quite astonishing. I should like to show the photographs to my hon. Friend. One might even pass from certain angles as the double of the other. There was no question here of the police being at fault. Mr. Crundall was separately identified by no fewer

than five of the women concerned, either from photographs or identification parade. Those shown the photographs of course did not attend an identification parade.
I cannot go into Mr. Chapman's case because an appeal is pending. As my hon. Friend said, identification evidence is particularly difficult to assess. It is essentially subjective. People's memories for faces vary particularly if a face was seen at a time of stress. In so far as in these circumstances witnesses can make mistakes there is no absolute safeguard against error. My hon. Friend suggested that there might perhaps be further safeguards. In so far as that involves a change in the law it would be out of order for me to discuss it on the Adjournment, but in so far as it might involve a question of practice the Criminal Law Revision Committee is looking at the whole of the evidence rules and law in criminal cases and this is one of the aspects on which we look forward to seeing the report from the Committee.
I come next to the question of committal proceedings and reports of committal proceedings. In one of these cases the person who actually committed the crime came forward and confessed to it when he read of the committal. So a full report of the proceedings was irrelevant in that instance but in another case it was not until the report of the actual trial was published that the person who committed the crime came forward. I agree completely and utterly with what my hon. Friend said about the implications of this kind of case on the whole issue of capital punishment. He has produced an unanswerable argument. These particular errors can be rectified—obviously they cannot be wholly rectified, but to some extent they obviously can be—but if capital punishment existed they could not be rectified and a wrongful identification could result in a man being hanged.
I must stress that Section 3 of the new Act does not prevent the reporting of committal proceedings. It only restricts what can be reported to essential facts, the identity of the courts, the names of the justices, names and addresses of the parties and the witnesses, the defence or a summary of the defence, the decision of


the court to commit and one or two other items. All the facts reported in the Wimpress case could have been reported if Section 3 of the Criminal Justice Act had been in force at the time. There are of course very good reasons for restricting the reporting of committal proceedings as a whole. I shall not go into the law as that would be out of order but they were fully explained at the time of the passing of the Criminal Justice Bill.
The defendant can opt for reporting. My hon. Friend has asked that in all cases it must be made clear to a defendant even when he is represented that this right exists. There is certainly a rule requiring magistrates' courts to inform unrepresented defendants of their right of having their cases reported. We did not think it necessary to require a represented defendant to be informed of this right because his legal representative should be aware of it but in the light of the representations my hon. Friend has made vie shall certainly consider whether or not this rule should be applied even to cases where the defendant is represented. We should certainly like to look at the suggestion that there should be a short adjournment if someone elects for his case to be reported so that a journalist can be informed that someone is opting for publicity.
The last point made by my hon. Friend was on the question of compensation. I must confess that he put his argument in a very attractive light. He said in effect that these persons were victims of crimes of violence. In the light of the way in which my hon. Friend puts it the arguments he advanced I should like very seriously to consider them. I also take the opportunity of explaining more fully the reasons why the issue of compensation so far has been treated differently.
In very exceptional circumstances the Home Secretary can and does authorise an ex gratia payment from public funds, but it has been the policy that this exceptional payment should normally be made only if there has been some negligence or misconduct on the part of the police or some other public authority or official, because, if it is the State which has been to some extent at fault, it is clearly right that the State should make recompense.
I do not think that the analogy my hon. Friend produced about negligence is a good one, because the person who cannot prove negligence does not suffer, except by losing his compensation. When it comes to the question of recompense for those who have been acquitted, those who may be innocent and do not get compensation may well suffer if my hon. Friend's scheme were adopted, because two classes of innocent people would be created—those who recovered compensation and who were therefore accepted publicly as being innocent, and those who did not recover compensation and who did not merely fail to recover compensation but also had a slight element of stigma attaching to them, in the sense that they were people who were in a class of lesser innocence.
This is a very difficult dilemma to escape from. After all, in criminal cases the onus of proof remains on the prosecution and as long as an accused person is not required to prove his innocence—I hope that it never will be required of an accused person that he should prove his innocence—it is very difficult to justify automatic compensation on acquittal or to distinguish between those who are more innocent than others.
I know that my hon. Friend will say that this is sharing injustice, but it is not. To some extent, if some are singled out for justice the injustice of the others is being added to: it would not be a sharing out. It would definitely be a greater degree of injustice to some who are acquitted than to others.
The case which my hon. Friend mentioned of someone who is proved to have been innocent because someone else is subsequently convicted is one where the proving of innocence depends on a haphazard event over which the person who is innocent has no control. Others may be equally deserving. Others may be equally innocent. The difficulty we face is that we do not wish in any way to suggest that there are some who are shown to be innocent, who get compensation, and who are therefore specially innocent, and others who may be innocent but who cannot be shown in the same way to be innocent and who are therefore regarded in some way as less innocent.
However, I think that the way in which my hon. Friend presented his argument warrants second thought being given to this question. I will carefully consider this, though obviously I cannot promise any compensation to any persons involved. As I said earlier, compensation is paid only in exceptional cases. I can promise

neither that these individuals will get compensation nor that the other difficulties which I have mentioned can be overcome on the lines which my hon. Friend suggested.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Ten o'clock.